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Glanbia plc Annual Report 2013

Glanbia plc Annual Report 2013

GLobal
Momentum

Glanbia plc
Glanbia House
Kilkenny
Ireland

Tel: +353 56 777 2200


Fax: +353 56 777 2222

www.glanbia.com
We are a global performance nutrition and
ingredients group with operations in 32
countries world-wide. We have leading market
positions in sports nutrition, cheese, dairy
ingredients, specialty non-dairy ingredients and
vitamin and mineral premixes. Our products are
sold or distributed in over 130 countries. While
Europe and the USA represent our biggest
markets, we are continuing to expand into
the Middle East, Africa, Asia Pacific and Latin
America. We employ 5,200 people globally and
our shares are listed on the Irish and London
Stock Exchanges (symbol: GLB)

Cautionary statement
The 2013 Annual Report contains forward-looking
statements. These statements have been made by
the Directors in good faith, based on the information
available to them up to the time of their approval of
this report. Due to the inherent uncertainties, including
both economic and business risk factors, underlying
such forward-looking information, actual results may
differ materially from those expressed or implied by
these forward-looking statements. The Directors
This report is printed on Heaven 42,
an FSC Mix paper made from recycled
undertake no obligation to update any forward-looking
and managed forest. 51% certified pulp statements contained in this report, whether as a result
(FSC / PEFC), 49% FSC - CW certified pulp. of new information, future events, or otherwise.
DIRECTORS REPORT
STRATEGIC REPORT
2013 results and 2014 outlook 2
Understanding our business 4
Where we operate 6
Key performance indicators 8
Group Chairmans statement 10
Group Managing Directors review 12
Group Finance Directors review 16
Special Feature: Our strategy for future growth 18

DETAILED BUSINESS REVIEW


Operations and financial review 30
Detailed risk report 38
Corporate social responsibility 42

Governance
Governance overview 50
Board of Directors and Senior Management 52
Audit Committee report 60
Nomination Committee report 66
Remuneration Committee report 70
Statement of compliance 89
Other statutory information 98
Statement of Directors responsibilities 101

FINANcIAL STATEMENTS

Independent Auditors report 104


Group financial statements 108
Company financial statements 113
Notes to the financial statements 116
Shareholders information 177
Contacts 180

Find out more at www.glanbia.com


Strategic Report

2013 Results and 2014 outlook

DOUBLE DIGIT
EARNINGS GROWTH

2013 highlights
Glanbia delivered a good operating and financial performance
in 2013.
Our wholly owned businesses delivered 10.3% revenue growth
and 10.0% EBITA growth, while margins were unchanged.
For the Total Group, which includes our share of Joint Ventures
& Associates, revenues increased by 10.5%, EBITA increased
by 9.2% and margins declined by 10 basis points.
Adjusted earnings per share increased 11.9%.
Results were underpinned by strong results from Global
Performance Nutrition as over 20% branded revenue growth
drove a 100 basis points margin expansion to 10.8% and an
EBITA increase of 27.9%.
Global Ingredients delivered a good performance. Revenues
increased by 11.5%, and EBITA increased by 8.1% while margins
declined by 30 basis points to 9.5%.
Dairy Irelands results declined significantly due to margin pressure
within Consumer Products while Joint Ventures & Associates
delivered a positive performance overall.
Our investment programme continued with total capital
expenditure of 112 million during 2013 together with a bolt-on
acquisition of a leading Scandinavian sports nutrition business in
January 2014.
Our dividend increased by 10% for the fourth consecutive year.

All growth figures are in constant currency. A significant portion of our earnings are denominated in US dollar.
The average exchange rate for 2013 was 21=$1.328 (2012: 21=$1.285).
To better reflect the structure of the Group post the disposal of 60% of Glanbia Ingredients Ireland Limited (GIIL)
in November 2012, a pro-forma adjustment has been made to 2012 results to treat GIIL as if it had been a 40%
owned associate for the full year and all comparisons are with these pro-forma figures.
Total Group includes Glanbias share of Joint Ventures & Associates and demonstrates the full scale of the
Groups activities.

2 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
We are guiding 8% to 10% growth in adjusted earnings

Detailed Business Review


per share for the full year 2014, constant currency.
Our ambition is to continue to deliver a similar organic
growth rate through to 2018, while seeking to sustain
a return on capital employed in excess of 12%.
Siobhn Talbot, Group Managing Director

Constant currency
Change change

Governance
Revenue
2.4bn +7.7% +10.3%
Total Group 3.3bn +8.0% +10.5%

Financial Statements
EBITA
187.7m +6.2% +10.0%
Total Group 226.7m +5.6% +9.2%

EBITA
MARGIN 7.9% -10bps no change

Total Group 6.9% -20bps -10bps

ADJUSTED EARNINGS
PER SHARE 55.46c +8.0% +11.9%

More information
Operations and financial review page 30

www.glanbia.com 3
Strategic Report

Understanding our business

our strong
strategic foundations

In 2013 we re-focused
our business structure to
four segments. Global GLobal
Performance Nutrition and Global
performance Ingredients
Global Ingredients are our nutrition
primary growth platforms
and represent in excess of
75% of Total Group EBITA.
Revenue 655.3m Revenue 1,074.6m
EBITA 70.6m EBITA 102.0m
EBITA margin 10.8% EBITA margin 9.5%
Manufacturing facilities 4 Manufacturing facilities 10
Employees 941 Employees 1,558

Business description Business description


Global Performance Nutrition is a Global Ingredients is comprised of
leading business-to-consumer (B2C) three distinct but related business-to-
branded sports nutrition business. business (B2B) operations. US Cheese
Our brand portfolio is comprised of is a large scale manufacturer and
Optimum Nutrition, BSN, ABB and marketer of American-style cheddar
Nutramino, each with its own brand cheese. It operates a total
essence and consumer appeal. We of four cheese and whey plants, all
produce the full range of sports located in the highly productive Idaho
nutrition products including protein, agricultural heartland. Ingredient
pre workout, muscle gainers and Technologies formulates and markets
general health and we are the market on a global basis a range of dairy and
leader in terms of innovation and new non-dairy based nutritional ingredients.
product development. Our products It creates a range of ingredient
are sold through a variety of channels systems that add value to companies
including specialty retail, internet and operating across a range of food and
gyms. While the USA, with almost nutrition sectors. Customised
70% of revenue, represents our Solutions blends vitamins, minerals
largest market, our products are sold and other nutrients according to exact
in over 100 countries worldwide and specification for a range of food and
we have a direct market presence in beverage customers. It operates
19 countries. across the USA, Europe and Asia.

Leading global provider of branded Leading manufacturer of


sports nutrition products American-style cheddar cheese
(including our Southwest Cheese
joint venture)
Leading global provider of
whey-based nutritional solutions
Leading global provider of
micro-nutrient premixes

More information More information


2013 segmental performance page 31 2013 segmental performance page 32
Strategic priorities page 25 Strategic priorities page 25

4 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Detailed Business Review
Total group revenue

Governance
DAIRY JOInT
IRELAND VENTURES & 27% 20%
ASSOCIATES
3.3bn

Financial Statements
20% 33%
Revenue 652.2m Revenue 900.5m
EBITA 15.1m EBITA 39.0m
EBITA margin 2.3% EBITA margin 4.3%
Manufacturing facilities 6 Manufacturing facilities 6
Employees 1,251 Employees 1,452
Total group Ebita
Business description Business description
Dairy Ireland is comprised of two Our Joint Ventures & Associates
businesses, Consumer Products and segment is comprised of the 17%

Agribusiness. Consumer Products is following: Southwest Cheese, a large


a leading supplier of branded scale manufacturer of cheese and 31%
consumer products to the Irish whey, based in New Mexico, USA;
market. Our product offering focuses Glanbia Ingredients Ireland, a leading 7%
primarily on dairy products and Irish dairy processor; Glanbia Cheese,
includes standard and fortified milks, a leading European mozzarella 227m
along with cheese, butter and cream. producer and Nutricima, a Nigerian 45%
Agribusiness is focused on the supply based branded consumer dairy
of inputs to the Irish agri sector products business. Each of these
through its network of almost 50 retail businesses is unique, with a clear
stores across Ireland. We are the rationale in the context of the overall
leading purchaser and processor of Group strategy. Glanbia has a strong
grain in Ireland. While a large portion track record with regard to the
of our grain is used in the successful operation of strategic joint Number of employees
manufacture of our branded animal ventures and we continue to view the
feed, we are also key suppliers to the joint venture model as a potential
beer, spirits and cereals industries. option for future growth.
28% 18%
#1 Irish supplier of farm inputs #1 Irish dairy processor
#2 selling grocery brand in #1 mozzarella producer in Europe
Ireland with Avonmore
5,202

24% 30%

More information More information


2013 segmental performance page 33 2013 segmental performance page 34

www.glanbia.com 5
Strategic Report

WHERE WE OPERATE

our global
footprint

Glanbia has a strong global


portfolio of operations, with
an in-market presence in
32 countries serving business
CANADA
customers and consumers worldwide.

2013 KEY STATistics


USA

6bn
Litres of milk processed MEXICO

527,000
Tonnes of cheese produced

268,000
Tonnes of dairy-based ingredients manufactured
BRAZIL

130+
Countries in which Glanbia products
are sold or distributed
URUGUAY

More information
Operations and financial review page 30

6 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Detailed Business Review
Governance
RUSSIA

EUROPE
BELGIUM
DENMARK
FRANCE
GERMANY
THE NETHERLANDS

Financial Statements
POLAND SOUTH
PORTUGAL KOREA
SWEDEN TURKEY
UK CHINA
JAPAN

JORDAN
INDIA
UAE

THAILAND PHILIPPINES
NIGERIA
MALAYSIA VIETNAM

SINGAPORE

INDONESIA

AUSTRALIA
SOUTH
AFRICA

KEY

Global Performance Nutrition Manufacturing

Global Ingredients Innovation

Dairy Ireland Sales & Technical

Joint Ventures & Associates Headquarters

www.glanbia.com 7
Strategic Report

Key Performance Indicators

measuring OUR
PERFORMANCE

We measure TOTAL SHAREHOLDER TOTAL GROUP EBITA


our long-term RETURN revenue
performance 35.4% 3.3bn 227m
with seven key 400 3.5
3.3
250

performance 350 3.0 3.0 225 227


2.8 215
indicators (KPIs), 300
2.5 200
182
250
which have been 200
2.0 175

identified by the Board 150


1.5 150

as those that are most 100 1.0 125

relevant to delivering 50 0.5 100

the Groups strategy 11 12 13 11 12 13


2011 2012 2013
and objectives. Glanbia
FTSE 350 Food & Beverage Index

A clear link exists between four Total shareholder return (TSR) Total Group revenue includes Total Group EBITA is a
of the KPIs total shareholder reflects the value delivered to wholly owned businesses measure of the underlying
return, adjusted earnings per shareholders arising from the and Glanbias share of Joint profitability of the Group,
share, net debt:adjusted ownership of a companys Ventures & Associates. While including Glanbias share of
EBITDA and return on capital shares over a period of time. movements in commodity Joint Ventures & Associates.
employed and the Annual It represents the change in the dairy markets can influence EBITA is earnings before
Incentive and Long-Term capital value of the shares plus revenue movements in a interest, taxation and
Incentive Plan (LTIP) elements dividends paid. Relative TSR, specific year, when viewed amortisation and excludes
of Glanbias remuneration measured against a defined over a period of time, revenue exceptional items.
policy. This policy relates to the set of peers, is a performance growth is an indicator of how
remuneration of the Executive Performance
condition of Glanbias 2008 Glanbia is succeeding in
Directors and senior executives Total Group EBITA was 226.7
LTIP, based on delivery of developing the Group through
in the Group. This aligns million, up 5.6% on 2012
stretch performance targets. its ongoing investment and
Glanbias remuneration (9.2% constant currency). This
acquisition programme.
performance targets with Performance was driven by a particularly
Group KPIs and strategic Glanbias TSR in 2013 was Performance strong performance from
priorities. 35.4% (2012: 80.6%). Three Glanbia delivered a good Global Performance Nutrition,
year TSR, as calculated in performance in 2013, driven complemented by good EBITA
accordance with LTIP, was by its two growth platforms, growth in Global Ingredients.
240.6%. Both the one year Global Performance Nutrition In the period from 2011 to
and three year TSR generated and Global Ingredients. Total 2013, Total Group EBITA
by the Group represents a Group revenue was 3.3 grew 11.7% CAGR.
significant outperformance billion, up 8.0% on 2012
compared with both peers (10.5% constant currency).
and relevant indices. The compound annual growth
rate (CAGR) from 2011 to
2013 in Total Group revenue
was 9.2%.

8 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Detailed Business Review
EBITA MARGIN Adjusted earnings Net debt: Return on
per share adjusted ebitda capital employed

Governance
6.9% 55.46c 1.7 times 14.2%
7.0 7.1 6.9 70 3.5 14.0 14.1 14.2
6.6
6.0 60 3.0 13.0
55.46 12.8
5.0 50 51.34 2.5 12.0

4.0 40 40.34 2.0


2.1 11.0
1.7 1.7
3.0 30 1.5 10.0

Financial Statements
2.0 20 1.0 9.0

1.0 10 0.5 8.0


11 12 13 11 12 13 11 12 13 11 12 13

Glanbia has four business Adjusted earnings per share Net debt to adjusted EBITDA Return on capital employed
segments with a range of (EPS) is calculated as the is calculated as net debt at (ROCE) is Group earnings before
EBITA margins. Long-term net profit attributable to the end of the year, including interest and amortisation net of
improvement in Glanbias equity holders of the parent, cumulative redeemable tax plus Glanbias share of
EBITA margin demonstrates before exceptional items and preference shares, divided results of Joint Ventures &
how the Groups strategy intangible asset amortisation by adjusted EBITDA. Associates after interest and tax
to focus on high growth, (net of related tax), divided by Adjusted EBITDA (earnings divided by capital employed.
higher margin products and the weighted average number before interest, taxation, Capital employed is calculated
segments is being successfully of ordinary shares in issue depreciation and amortisation) as the Groups non-current
implemented. It also illustrates during the year. It shows the is calculated as EBITDA for the assets plus working capital.
how the underlying business is profitability of the underlying wholly owned businesses plus ROCE is a measure of how well
consistently moving up the business and is a measure dividends received from Joint the Group utilises its resources
value chain to maximise the of return on equity. Adjusted Ventures & Associates. Net in organic capital investments
potential value of the Groups EPS is a performance debt to adjusted EBITDA is and acquisitions. ROCE is a
milk pools and ingredient condition of Glanbias Annual a performance condition of performance condition of
capabilities. Incentive Plan and 2008 LTIP Glanbias Annual Incentive Plan Glanbias 2008 LTIP based
based on delivery of stretch based on delivery of stretch on delivery of stretch
Performance
performance targets. performance targets. performance targets.
Total Group EBITA margin in
2013 was 6.9%, reflecting a Performance Performance Performance
7.9% margin in the wholly Adjusted earnings per share The Group achieved a year ROCE improved by 10 basis
owned businesses, down was 55.46 cents, up 8.0% end net debt to adjusted points to 14.2% for the year
10 basis points on 2012 and on 2012. This equates to EBITDA leverage ratio of (2012: 14.1%). The Group
4.3% in the Joint Ventures 11.9% growth on a constant 1.7 times (2012: 1.7 times) operates to an internal hurdle
& Associates, down 30 currency basis, ahead of compared to the Groups rate for investment decisions of
basis points. market expectations. From banking covenant of a 12% post tax, by year three.
2011 to 2013 adjusted maximum of 3.5 times. Strategic capital expenditure
earnings per share grew during the year amounted to
17.3% CAGR. 2013 is the 76.5 million, with total three
fourth consecutive year that year investment of 132 million.
Glanbia has generated double ROCE increased by 140 basis
digit constant currency points from 2011 to 2013.
earnings growth.

More information
Remuneration Committee report page 70

www.glanbia.com 9
Strategic Report

Group Chairmans statement

ANOTHER GOOD
YEAR FOR GLANBIA

Dear Shareholder
It has been another positive year of growth for
Glanbia plc. A strong operating and financial
performance delivered good revenue and profit
increases, driven by the Groups two primary
growth platforms, Global Performance Nutrition
and Global Ingredients. Glanbia achieved 12%
growth in adjusted earnings per share, on a
constant currency basis: the fourth consecutive
year of double digit earnings growth. Total Group
revenue, including the Groups share of Joint
Ventures & Associates, was 3.3 billion, up 8.0%
(10.5% constant currency). Total Group EBITA
Liam Herlihy, Group Chairman was 226.7 million, up 5.6% (9.2% constant
currency) and Total Group EBITA margin was
6.9%. A detailed review of our 2013 performance
is in the Operations and Financial Review on
page 30 of this report.

Ongoing capital investment


We continued to invest in the business over the
course of 2013 with total capital expenditure of
112 million. The key projects undertaken include
investment in a 234 million capacity expansion in
Global Performance Nutrition and within Global
Ingredients a 222 million state-of-the-art specialty
Governance highlights
grain processing facility in South Dakota, USA and
Externally facilitated Board evaluation completed, with an an 28 million Cheese Innovation Centre in Idaho,
overall positive assessment and the Boards performance USA. The return on capital employed achieved by
rated as very good; the Group in 2013 increased by 10 basis points to
14.2%, a good result in the context of the
Seamless transition of the Executive Leadership of the substantial ongoing capital investment
Group with the appointment of very high calibre individuals programme.
both from within Glanbia through succession planning and
by external recruitment; Bolt-on acquisitions
Review of the continued independence and objectivity of In January 2014, in line with the international
our external Auditors, which was found to be satisfactory; growth strategy of Global Performance Nutrition,
Enhanced Remuneration Committee reporting as we we acquired Nutramino, a leading Scandinavian
continue to refine and develop our reporting in this area in sports nutrition company which focuses primarily
line with best practice; and on branded, ready-to-consume products sold
through gym and convenience channels. With
Four-day Board visit to the USA enabling the Board to activities in Denmark, Sweden and Norway,
develop a greater understanding of the business through Nutramino extends Global Performance Nutritions
meeting employees and experiencing our operations in-market sales presence to 19 countries
first hand. worldwide and further consolidates our position
as the global leader in sports nutrition. In March
2013, we acquired a small specialist cheese plant
More information in Idaho to complement our new US Cheese
Governance overview page 50 Innovation Centre and extend our capability there.

10 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
We delivered a good set of results in 2013,

Detailed Business Review


refreshed our Board, appointed a new
Executive team and continued with our
organic investment programme.

Board and management changes Long-term strategic roadmap


Glanbia saw a number of Board and This year we took a detailed look at the Our thanks to John Moloney
management changes during the course Groups long-term strategic potential, with

Governance
of 2013. In November, Siobhn Talbot the aim of helping the Board to determine
became the Group Managing Director the growth potential within our existing
following the retirement of John Moloney. businesses, including the strength of our
Siobhn has been with the Group for over capabilities and assets. In her review,
20 years and held the position of Group Siobhn sets out how taking a different lens
Finance Director until May when she was to the business has crystallised a priority
appointed Group Managing Director set of growth opportunities that will help
Designate. Mark Garvey, previously Glanbia optimise its portfolio of businesses.

Financial Statements
Executive Vice President and Chief
Financial Officer of Sara Lee Corporation, 2014 positive outlook
joined Glanbia as Group Finance Director Glanbia now has 5,202 employees John Moloney retired as Group
and became a member of the Board in worldwide and it is their continued Managing Director in 2013, after a
November. In June, Hugh McGuire was dedication that contributes so much to our distinguished 26 year career with
appointed to the Board as an Executive ongoing success. My thanks and that of Glanbia. He joined the Group in
Director with responsibility for Global my Board colleagues goes to all the great 1987 and became Group Managing
Performance Nutrition, while Brian Phelan people who work in Glanbia. Overall, the Director in 2001. Under his
was appointed Chief Executive Officer of outlook for the Group for 2014 is positive. stewardship, the profile of Glanbia
Global Ingredients, having been appointed While Global Performance Nutrition is has been transformed.
to the Board in January 2013. expected to be the main driver of growth,
we anticipate solid performances across Our international growth has been a
During the year, Donard Gaynor and all business segments. We are guiding 8% hallmark of Johns tenure. Glanbia
Vincent Gorman joined the Board as to 10% growth in adjusted earnings per now has a footprint in 32 countries
Non-Executive Directors while Billy share on a constant currency basis for and generated 76% of our 2013
Murphy, Robert Prendergast and Brendan 2014. The long-term prospects for the earnings in the Groups two key
Hayes retired from the Board. Jerry Liston, Group are also positive. We have a unique growth platforms.
also a Non-Executive Director, has portfolio in both the business-to-business
announced his intention to retire at the and business-to-consumer arenas that Total Shareholder Return (TSR)
Annual General Meeting (AGM) in May creates distinctive competitive advantage has delivered a 14 fold increase over
2014. I would like to sincerely thank all for Glanbia and will drive our next phase the period. The sustained strong
departing members of the Board for their of growth. performance in the Groups TSR is
contribution and commitment to Glanbia testament to the global business
over the course of their tenure. I would like that was built during Johns
to welcome our new Board members and leadership.
in particular I would like to wish the Groups
new Executive team every success. We thank John most sincerely
Liam Herlihy, for his very significant contribution
Dividend and AGM Group Chairman to what Glanbia is today. On
The Board is recommending a final behalf of everyone connected
dividend of 5.97 cents per share, bringing with Glanbia, we wish John and
the total dividend for the year to 10.00 his family every success and
cents per share, representing an increase happiness in the future.
of 10.0%. The Groups AGM will be held
on Tuesday, 13 May 2014, in the Lyrath
Estate Hotel, Old Dublin Road, Kilkenny.
Subject to approval at the AGM, dividends
will be paid on 16 May 2014 to
shareholders on the register of members
as at 4 April 2014. Irish withholding tax will
be deducted at the standard rate where
appropriate.

www.glanbia.com 11
Strategic Report

group MANAGING DIRECTORs REVIEW

Our NEXT PHASE


OF GROWTH

Siobhn Talbot, Group Managing Director

Siobhn Talbot became Group Q What is your main strategic agenda at the start
of your tenure as Group Managing Director?
Managing Director of Glanbia plc in I have taken over as Group Managing Director at an
November 2013. She is a 20 year exciting time for Glanbia. Our business has been
transformed in the past decade. This has been
veteran of the Group and was Group through nutritional ingredients and sports nutrition
Finance Director until her appointment acquisitions, ongoing organic investment and
as Group Managing Director Designate development, joint ventures and a series of whole
or part divestments.
in May 2013. Here, Siobhn talks
about why continuing to build on the This strategic reshaping of Glanbia has significantly
enhanced the profile of our business portfolio and the
Groups two global growth platforms is quality of our earnings. It has also underpinned our
central to achieving the Groups track record of growth. My goal is to sustain our
growth momentum, primarily focusing on our two
ambitious strategic priorities. global platforms of performance nutrition and
ingredients. In 2014, we have set a clear strategic
direction for the next phase of sustainable growth and
will continue to build world-class capabilities, in the
areas that are integral to our future success.

What are Glanbias strategic priorities in 2014


Q and beyond?
The completion of our recent strategic review process
with the Board has led to an agreed set of strategic
priorities for the Group and a refreshed business
model, both of which are set out in detail in our special
feature on strategy, starting on page 18 of this report.
I believe that these strategic priorities combined with
current capabilities and assets will enable us to
optimise the potential of Glanbias portfolio and
deliver the next exciting phase of growth and
development for the Group.

12 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
We have deep dairy experience,

Detailed Business Review


a unique span of customer and
consumer insights and first mover
or leadership positions in select
segments and markets.

How will strategic success by Glanbia be defined What are the opportunities for growth within
Q in the next five years? Q Global Ingredients?
Together with the Board and my fellow Executive Global Ingredients spans dairy and non-dairy

Governance
Directors we have defined our growth ambitions for ingredients in business-to-business markets. In its
the next five years on two levels. We believe that the widest sense our ingredients activity covers both our
Group can achieve annual organic growth of at least wholly owned Global Ingredients business segment
8% to 10% in adjusted earnings per share, on a and three of our four key Joint Ventures & Associates.
constant currency basis while aiming to sustain a This combination underpins our leadership position in
return on capital employed in excess of 12%. Our American-style cheddar cheese in the USA and has
ambition stretches beyond this and we will be actively facilitated the expansion of our ingredients and
pursuing opportunities to add further scale to Glanbia performance nutrition product portfolio, through

Financial Statements
through acquisitions and strategic joint ventures and innovation in whey and dairy protein.
alliances, as we seek to deliver higher levels of growth.
Our global ingredients capabilities play into clear
Glanbia has two, well established and thriving positive global growth trends, trends which range from
platforms in Global Ingredients and Global an increasing recognition of the importance of reliable,
Performance Nutrition, business segments which sustainable, high quality mainstream food supply to
account for over 75% of our earnings. A fundamental the increasing demand for the delivery of specialised
pillar of our strategy is the continued development of nutrition addressing specific health needs.
these two global platforms, both of which have
specific capabilities to address key global consumer Our focus for organic growth in dairy is the
trends in food and nutrition. maximisation of the value of our existing ingredients
and raw materials though capital investment, product
What are the opportunities or catalysts for higher development and innovation. In our non-dairy
Q than 8% to 10% earnings growth? operations we believe that we can drive both volume
There are specific global trends in nutritional and and value growth in areas such as specialty grains,
ingredients markets that are driving demand and premix solutions and the development of innovative
structural change in consumer needs and, as a food and nutrition systems. A recent example of a
consequence, markets. Our current business portfolio non-dairy system is the award winning Optisol 3000,
is uniquely positioned at the centre of these trends, which is an egg replacement for the bakery sector that
which are set out in some detail on page 20 combines whey protein and flax.
of this report. As a result, there is a robust market
backdrop to support growth in our sector. Beyond our organic growth aspirations we will seek to
sustain and develop our leadership position in US
I believe that we have a range of opportunities to build Cheese, more than likely through a strategic joint
on the organic potential of the Group by adding venture or alliance, a model that has been successful
further scale to both our global platforms. We currently for Glanbia. We are actively pursuing opportunities
have 250 million debt capacity and we could also and I expect that, over the next five-year planning
seek to increase this by way of additional equity for cycle, we will be successful in achieving this. Glanbia
the right strategic project, something, I believe, the has a strong track record of delivery not just in
Board and the Groups largest shareholder, Glanbia running, but also in building and commissioning, on
Co-operative Society, would support. time and on budget, large scale dairy processing
facilities. We also have established commercial and
innovation capability making us an attractive and
compelling partner in the dairy industry.

More information
Our strategy for future growth page 18

www.glanbia.com 13
Strategic Report

group MANAGING DIRECTORs REVIEW

What are the growth ambitions for Global What, in your view, are the current strengths
Q Performance Nutrition? Q Glanbia has in capabilities and assets?
We are very positive in relation to the opportunity to There are a number of areas in which I believe Glanbia
continue to grow our Global Performance Nutrition has world-class demonstrable capabilities and assets.
(GPN) business, currently the largest global sports In terms of management capabilities we have a
nutrition consumer brand family. GPN has the top proven track record in delivering on our priorities as
sports nutrition brands in the USA, is in the top 3 in evidenced by our financial and operating performance.
some 20 countries worldwide and is now a market
leader in Scandinavia through the acquisition of In terms of our operational capabilities, we have
Nutramino in 2014. We are ambitious for GPN three distinct strengths: operational excellence, new
and aspire to double the size of the business from product development and innovation, and customer
where it is today. relationships.

GPN has a very clear mission to be the first choice of Operational excellence has always been a hallmark
athletes and fitness enthusiasts everywhere, to help of Glanbia. We focus on high quality production and
them achieve their goals through the highest quality, operational activities and strive to be an extremely
most innovative nutrition products.To support both efficient converter of raw materials into finished
GPNs ambition and mission, we will continue to invest products for our customers. This is a philosophy that
in the business. This will include organic projects we will continue to embed as we increasingly adopt
and acquisitions in both the USA and targeted the Glanbia Performance System across our
high-potential international markets, growing operations.
infrastructure and facilities as well as people capabilities
in marketing, sales, supply chain and innovation. Secondly, we have strong capability in new product
development and innovation, including a catalogue of
With such a focus on global platforms, where existing intellectual property. In Global Ingredients this
Q does Dairy Ireland fit within the Groups portfolio? ability to innovate in response to emerging consumer
Dairy Ireland and Glanbia Ingredients Ireland Limited trends has enabled us to move up the ingredients
(GIIL), our Irish dairy processing associate, are important value chain through close collaboration with our
elements of our portfolio. Dairy Ireland is undoubtedly customers. In GPN, innovation has ensured that we
experiencing a challenging environment currently, continue to respond to consumer requirements so
particularly in Consumer Products. We expect some that our brands retain category leadership.
improvement in performance in 2014, primarily reflecting
the benefits of the rationalisation measures taken in Thirdly, we strongly value our relationships with our
recent months. customers. In our Global Ingredients business we
seek to position ourselves as a responsive partner
Overall, I believe that we are doing the right things to of choice while in GPN we have built strong
underpin the long term sustainability of our Dairy Ireland connections with key customers and consumers
businesses through an ongoing focus on cost, efficiency that have enabled this business to profitably
and investment in select growth opportunities. These outpace market growth rates.
include our 2014 investment in an Ultra-Heat-Treated
(UHT) milk facility in Consumer Products, the output of Finally, as an organisation our core assets are reflected
which is targeted towards emerging markets, particularly in our scale and brands. We have scale market
in Asia, and an oatmeal milling facility in Agribusiness, leadership positions, scale processing facilities and
providing high quality Irish oats for a branded consumer access to large scale milk pools. We also have four
product owned by Sturm Foods in the USA. iconic brands to date in our sports nutrition brand
family and on the B2B side the Glanbia brand for
For GIIL the 150 million investment in the new dairy quality, sustainability and customer collaboration.
processing facility in Ireland is progressing well and is
expected to commence commissioning in late 2014.

14 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
The challenge is to execute the next

Detailed Business Review


phase of sustainable growth and
continue to build an organisation with
world-class capabilities in the areas that
are integral to our future success.

How will the market backdrop of the next five years


Q potentially impact delivery of your strategic plans?
SUPPORTING OUR STRATEGY
A detailed review of the market backdrop is part of our

Governance
strategic planning process, where we review, amongst
special feature

This special feature is an


update on our markets

other issues, dairy market trends and outlook, forecasts


and growth opportunities,
value chain, strategy
and business model.
The focus of our strategy and

for the global economy and exchange rates. For our


strategic priorities is our two
complementary growth platforms.
Combined these businesses create
distinctive competitive advantages for
Glanbia, through deep dairy expertise,
unique span of market insights and first
mover or leadership positions in key

five year planning cycle we keep these overall macro


market segments.

assumptions constant, based on year one. While


there will inevitably be annual variations within a five
year time frame, this methodology allows us to take a
long term approach to strategy, which is focused on

Financial Statements
the controllable drivers of growth across our portfolio. glObal
momentum
What are your personal priorities for the business
Q
Introducing our strategy for future growth

in 2014 and beyond?


My overriding personal priority is to ensure the delivery Special feature
of our strategic objectives and growth plans. I would Our capabilities from primary processing to
also like one of the hallmarks of my new role to be a branded consumer products provide unique
renewed energy and focus on our employee customer and market insights. This enables
engagement and development. My first steps are a us to be truly responsive to market trends and
planned Group-wide tour to meet as many employees opportunities, providing innovative solutions for
as possible, to communicate our refreshed strategy both our customers and ultimate consumers. In
and get buy-in and understanding for it through the this report we have included a special feature
roadshow. I believe Glanbias success is built on the introducing our strategy for future growth.
talent of our people who are innovative and pioneering,
whether it is about improving performance, More information
collaborating with customers or building new Our strategy for future growth page 18
markets. I would like to thank all our employees and
look forward to their continued support. Our responsibilities
Glanbias approach to corporate responsibility
is focused in three areas our employees, our
operations and our local communities.
More information
Siobhn Talbot, Corporate social responsibility page 42
Group Managing Director
Risk management
The Group has a clear risk governance
framework and a structured approach to risk
management. We set out the most significant
risks that could materially impact our operating
and financial performance, strategy and
prospects along with our mitigating actions.
More information
Detailed risk report page 38

Key performance indicators


We measure our long-term performance and
progress of our strategic objectives through
seven financial key performance indicators (KPIs).
More information
Key performance indicators page 8

www.glanbia.com 15
Strategic REPORT
STRATEGIC Report

Group Finance directors review

A STRONG TOP AND


BOTTOM LINE performance

This has been another good year for Glanbia


enabling us to deliver a strong top and bottom line
performance and continue our track record of
earnings growth and top quartile total shareholder
returns. Adjusted earnings per share grew 11.9%
constant currency, which was ahead of our
guidance and represents the fourth successive
year of double digit earnings growth.

In particular our two growth platforms, Global


Performance Nutrition and Global Ingredients,
performed well. Global Performance Nutrition
grew branded product sales in excess of 20%
Mark Garvey, Group Finance Director and this drove strong EBITA growth for this
business of 27.9%, constant currency, for the full
year, together with a 100 basis points increase in
margins. Revenue in our Global Ingredients
business grew 11.5% and EBITA increased by
8.1%, constant currency, while margins reduced
30 basis points to 9.5%. Global Performance
Nutrition and Global Ingredients now represent
over 75% of Total Group EBITA and over 90% of
EBITA from wholly owned businesses.

Strong financial position


The Groups financial position remains strong. Net
debt at year end was in line with the prior year at
374.4 million and we remained well within our
debt covenants. Net debt to adjusted EBITDA at
Key financial highlights: year end was 1.7 times and interest cover was
7.8 times. With the exception of 39.1 million of
Revenue growth from wholly owned segments preference shares due to mature in July 2014, the
of 10.3% (constant currency); Groups remaining debt matures in 2018 (466.6
EBITA margin of 7.9% for wholly owned segments; million) and 2021 (238.4 million).
Adjusted EPS growth of 11.9% (constant currency),
Focus on working capital
ahead of market guidance;
A specific area we plan to focus on is working
Return on capital employed of 14.2% compared capital. In 2013 our working capital increased by
to 14.1% in 2012; 40 million and amounted to some 226 million at
Free cash flow of 88 million; year end. We see opportunities to improve our
77 million spent on strategic capital expenditure; working capital performance in the coming years
and have already commenced a review of our
Year end net debt of 374 million and net debt working capital management processes across
to adjusted EBITDA of 1.7 times, in line with 2012; and the Group.
Total shareholder return of 35.4% outperforming key
relevant stock market indices. Investing for growth
During 2013, we continued with our annual
organic capital investment programme, with 112
million capital expenditure across the Group. Our
2014 plans include capital expenditure in the
More information
Financial review page 35
region of 120 million, of which approximately 80
million will be spent on strategic capital projects.

16 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
The Groups financial position remains

Detailed Business Review


strong with a 35% increase in free cash
flow and net debt ratios well within our
banking covenants.

In January 2014, we purchased In 2014, the principal risks affecting the INVESTOR RELATIONS
Nutramino, a Scandinavian sports nutrition Groups performance are:
business, as we continue to expand our
We are very committed to an open

Governance
Global Performance Nutrition segment Milk availability in our US Cheese
internationally. Additionally, we have debt business and the potential impact on and transparent dialogue with our
capacity of approximately 250 million cheese and commodity whey volumes shareholders and we had a
available to fund acquisition activity when and milk costs; successful year from an investor
the right opportunity arises. relations perspective. The placing
The ongoing challenges in Consumer
of 17.6 million ordinary shares by
Products in terms of milk input costs
Delivering returns to shareholders Glanbia Co-operative Society
and the continued difficult Irish retail
2013 was another strong year for our Limited at the end of 2012
environment; and

Financial Statements
shareholders. Total shareholder return combined with the distribution of a
(TSR) for the year was 35.4% following a The effective execution of our growth further 20.6 million shares to Society
TSR for 2012 of 80.6%. Glanbias share strategy within Global Ingredients and members in March 2013 brought
price at its financial year end increased Global Performance Nutrition. about significant change in our
from 8.24 to 11.05. The share price share register and created new
The Groups principal risks and capital market interest in Glanbia. In
outperformed the FTSE 350 Food and
uncertainties are outlined in the detailed this context we participated in over
Beverage Index by 18.3%.
risk report on page 38. 150 investor meetings and investor
Positive Group outlook conferences in 2013 in Ireland, the
Clear financial strategy
Overall, the outlook for the Group for 2014 UK, mainland Europe and North
As Group Finance Director, I am focused
is positive. We expect Global Performance America. In addition we held a
on supporting our strategic priorities while
Nutrition to deliver a good performance for capital markets day at the London
maintaining a healthy balance sheet and a
the year. Continued growth is built on Stock Exchange in May 2013 with
strong control environment. Our finance
brand strength, ongoing investment in the focus on our two global growth
strategy is designed to facilitate a robust
capacity and capabilities, together with platforms. There was also progress
organic and acquisition investment
a clear focus on specialty and internet in expanding our research coverage
programme to support growth. In the long
sub-segments and further international in 2013 with the addition of three
term we will be driving to achieve 8% to
growth. new analysts bringing the total to
10% constant currency growth in earnings
seven stockbrokers.
In Global Ingredients tight milk supply in per share each year while sustaining a
Idaho is leading to increased competition, return on capital employed over 12%. In Investor relations app
the impact of which is expected to be addition, we will use debt and equity as Our investor relations app will allow
higher milk costs and some year-on-year needed to fund strategic investments, you to keep up to date with the
volume declines in both US Cheese and mindful of keeping an overall leverage ratio latest share price information and
Ingredient Technologies. While the at less than 3.0 times net debt to adjusted news and also provides access
situation continues to evolve, we are EBITDA which is in line with an investment to financial reports, presentations
managing the overall impact with our grade credit rating. We have exciting years and multi-media, both online
suppliers and customers and, combined ahead of us in 2014 and beyond and I am and offline.
with a good performance in Customised very happy to have joined the Glanbia
Solutions, we expect Global Ingredients to Executive team for the journey. Available for iPad, iPhone and
deliver a positive performance for the year. Android devices.

We expect some improvement in


performance in Dairy Ireland in 2014,
against the backdrop of an exceptionally
difficult 2013. Joint Ventures & Associates
are expected to perform broadly in line
with 2013. Overall we are guiding 8% to
10% growth in adjusted earnings per share Mark Garvey
for the year, on a constant currency basis. Group Finance Director

www.glanbia.com 17
special feature

This special feature is an


update on our markets
and growth opportunities,
value chain, strategy
and business model.
The focus of our strategy and
strategic priorities is our two
complementary growth platforms,
Global Performance Nutrition and
Global Ingredients. Combined
these businesses create distinctive
competitive advantages for Glanbia,
through deep dairy expertise, unique
span of market insights and first
mover or leadership positions in
key market segments.

18 Glanbia plc 2013 Annual Report and Accounts


glObal
momentum
Introducing our strategy for future growth

www.glanbia.com 19
Strategic Report

Our markets

global GROWTH
oPPORTUNITIES

It is a decade since we identified the emergence of wholesale


changes in consumer attitudes to food and nutrition, moving
from diet as basic sustenance to nutrition as the fuel to improve
performance, health and lifestyle.

Growing global urban Food quality,


middle class adopting ingredient authenticity
and adapting western and traceability
lifestyles and diets concerns

Macro
Advancements Rising
in Nutrition healthcare
science and
food technology trends costs in ageing
societies

Growing global Increased


population and frequency
increasing concerns & intensity of
regarding security exercise in modern
of food supply urban lifestyles

Changing consumer attitudes to nutrition have been further strengthened


by supportive global demographic and macro economic trends.
Together, these continue to provide a strong and compelling market
context for our growth opportunities in nutrition.

There is a robust market backdrop to support


growth in our sector and I believe that with our
capabilities and assets we have a range of
opportunities to build on this potential.
Siobhn Talbot, Group Managing Director

20 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Detailed Business Review
Consumer trends in nutrition OUR opportunities

Growth of multiple nutrition segments


Addressing specific consumer needs according to B2C

Governance
differences in life-stage, gender, performance demands,
health issues, regional diets and regulatory frameworks.
Global Performance
nutrition
Increasing demand for higher nutrient density
in mainstream diets Global Performance Nutrition is harnessing the
Improving processed food and beverages to include global growth in household penetration of the

Financial Statements
more nutritious ingredients and new formats to fuel performance nutrition category through our
everyday performance. brand strength, breadth of product range and
format, and global presence.

As the consumer base expands, across both


sport and lifestyle users, we are trusted leaders in
Increasing understanding of synergistic benefits the specialty retail and online channels where
of exercise and diet new consumers are engaging with the category.
Optimising performance and well-being by tailoring
nutrition to specific activities and better sequencing Glanbias latest innovations, incorporating the
of exercise and nutrition. best in nutrition science and format delivery,
continues to address a more granular set of
consumer segments as user need states are
becoming better understood within the sports
Increasing demand for supplements nutrition category.
and natural prevention
Using nutrition to improve underlying health
and performance reducing the requirement for
medical interventions.
B2B

Growing prevalence of snack-based Global Ingredients


meal replacement
Driving broader range of food and beverage formats Global Ingredients is ideally positioned to work
for convenient and on-the-go consumption. with our customers to address this growing
consumer demand for higher nutrient density
and cleaner labels in food ingredients and
formulations.

Demand for ingredient authenticity and traceability Our broad portfolio of nutritional ingredients and
Providing assurance to address multiple consumer technologies enables customers incorporate
concerns as to the source, quality and treatment of food our solutions into multiple nutrition categories,
ingredients across broad and varied diets. channels and formats, with the versatility to
adapt to regional preferences in taste and
texture of food delivery globally.

www.glanbia.com 21
Strategic Report

Our Value Chain

Unique portfolio B2C


& capabilities
CONSUMER
BRANDS
We add value to our portfolio
by moving up the value chain
from base ingredients to
consumer brands.

Glanbia has a unique portfolio of products,


capabilities and brands. Our B2B activities
comprise large scale, low cost dairy B2B
processing as well as expert capabilities
in proprietary technologies in dairy and
non-dairy ingredient solutions and Solutions
systems. Our B2C activities leverage
our expertise in dairy protein as a & Systems
cornerstone of our global sports
nutrition brand family, where we have
four brands marketing 80 products in
all key performance nutrition categories.

Adding value through customer-focused


innovation and collaboration is central to
our philosophy. It ensures that we can
influence and drive market trends rather
than simply respond to them. Specialty
Brian Phelan, CEO, Global Ingredients
ingredients

BASE
ingredients

22 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Our brands

Detailed Business Review


Our four performance nutrition brands Optimum Nutrition
include products in protein, energy, BSN
performance and recovery together with
ABB
general health such as multi-vitamins and
supplements. Whey is a key component Nutramino
of protein-based performance nutrition
and underpins the protein product
architecture within our global sports
nutrition brand family.

Governance
Our Products

In Glanbia we combine ingredients to Dairy-based protein systems

Financial Statements
form systems which deliver specific Vitamin & mineral premix solutions
nutritional and functional benefits to our
Specialty grain systems
customers. We have the capability to
produce full turn-key solutions for Aseptic beverages
customers in the sports nutrition,
beverage, breakfast cereal, infant formula,
supplement and nutrition bar segments.

Glanbia has pioneered the development Whey Protein Isolate


of technologies and processes for the Whey Protein Concentrate
application of whey, a valuable source
Milk Protein Isolate
of protein. Today the Group is a leading
global manufacturer, marketer and user Milk Protein Concentrate
of whey protein fractions and isolates. Specialty milk minerals and proteins
We have complemented our dairy (calcium and lactoferrin)
specialty ingredients portfolio with Specialty grains milling (flax and chia)
non-dairy protein and other ingredients.

Our US Cheese and three of our four Cheese


Joint Venture & Associate businesses Whey Protein Concentrate
have access to large sustainable milk
pools in the USA, the UK and Ireland. Lactose
This give us supply chain visibility, which Other dairy ingredients (milk powders,
is a key global customer and consumer casein, butter)
differentiator. It also give us access to large
captive whey volumes, making our broad
range of high-quality base ingredients a
critical asset for Glanbia.

More information
Segmental strategic priorities page 25

www.glanbia.com 23
Strategic Report

Our strategy

NEW strategic
MOMENTUM
Our vision
We have undertaken a broad
and in-depth review of our Our vision is to be the leading global performance
long-term strategy to nutrition and ingredients group.
understand the growth
potential within our existing STRATEGIC OBJECTIVES
businesses and to rigorously
evaluate the strength of our Our strategic objective is to maximise total returns to
shareholders. We will also maintain a strong position on key
capabilities and assets. sustainability issues including food safety and quality, the
environment, regulation and nutritional innovation.
This has enabled us to refine our strategy,
set strategic ambitions and prioritise our
capital allocation to optimise the
value of our existing portfolio and bring group STRATEGIC priorities
new momentum to Glanbias global
growth potential.

1 Sustain current and drive


further market leadership
positions within both B2B and
B2C global growth platforms

2 Deliver strategic capital


investment programme

3 Acquire or partner with


complementary businesses to
scale our current portfolio

We now have a different lens


on the business and our portfolio, 4 Develop talent, culture and
values, in line with our
recognising also that we have a growing global scale
wider set of growth opportunities
and greater financial flexibility.
Mark Garvey, Group Finance Director

24 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Detailed Business Review
segmental strategic priorities 2014 to 2018 organic strategic targets

bottom line growth

B2C
8 10

Governance
% to %
Adjusted organic earnings per share growth,
Global Performance constant currency.
nutrition
Return on capital employed

12 +
Become the first truly global performance nutrition

Financial Statements
company with a relentless focus on consumer insights
to retain and drive category leadership to:

Grow in US specialty and internet channels;


%
Focus on high-growth emerging markets and Our 2014 to 2018 strategic targets are to achieve
continue with rapid international expansion; annual organic growth of at least 8% to 10%
in adjusted earnings per share, on a constant
Venture into new markets, channels and consumer
currency basis, while sustaining a return on
segments; and
capital employed in excess of 12%.
Enhance capabilities in marketing, sales,
Our ambition stretches beyond this and we will be
supply chain and product innovation to grow
actively pursuing opportunities to add further scale
our business further.
to Glanbia through acquisitions and strategic joint
ventures and alliances, as we seek to deliver higher
levels of growth.
B2B We monitor trends in our long-term progress by
measuring growth or improvement in our seven
financial key performance indicators (KPIs):
Global Ingredients
Total shareholder return
Harness the benefits of our deep dairy expertise Total Group revenue
and unique span of market and customer insights EBITA
to become a truly global ingredients business to:
EBITA margin
Sustain our leading American-style cheddar Adjusted earnings per share
cheese position; Net debt: adjusted EBITDA
Leverage our whey expertise and add to our Return on capital employed
portfolio of protein ingredients and systems;

Strengthen our global relevance in premix


solutions; and

Scale positions in other dairy and


non-dairy ingredients. More information
Three year KPI performance page 8

www.glanbia.com 25
Strategic Report

our business MODEL

clear business
model

Today, Glanbia has well-established and strong strategic foundations.


In order to achieve our 2018 strategic ambitions, we need to ensure we
continue to develop a clearly defined set of world-class capabilities and assets.

Strong Global
customer organisation
relationships

Science-backed portfolio
innovation management
Portfolio
optimisation

Operational Brand
excellence power

SCALE TO
LEADERSHIP

Our business model Corporate role Business segment role


Our business model is based on The Corporate role is to set the overall The role of our business segments is to
optimising the value of our portfolio of strategic direction of the Glanbia deliver results at the frontline of operations
businesses which includes four business organisation. In conjunction with the based on a clear strategic roadmap and
segments spanning the B2B and B2C Board, the Group Operating Executive business plans. This is achieved in a
arenas. As a global business, with allocates resources across the business number of ways including collaborative
operations in 32 countries, it is important portfolio, based on the highest growth innovation with customers, new product
that throughout Glanbia we share a opportunities. The objective is to maximise and ingredients innovation, developing
common set of capabilities. As part of shareholder returns. The focus is to new regions and adjacent market
strategy development, we identified critical achieve targeted, bottom line earnings segments and building brand equity
management and operating capabilities growth, within requisite returns on capital. both with consumers in our B2C
and proprietary assets which will enable segment and with global customers
us to deliver results across the business. in our B2B businesses.

26 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Loyalty to our brands is based on our uncompromising

Detailed Business Review


commitment to the highest quality ingredients and to
consumer-driven product innovation.
Hugh McGuire, CEO, Global Performance Nutrition

Understanding our business model Operational excellence


Global organisation Operational excellence is a long standing core
Excellence in human resources and talent capability in Glanbia. It is focused on achieving

Governance
management is key to the Groups ongoing success. high-quality products to meet customer food safety
It is also important across a global business that and quality standards. It is also central to running large
Glanbia shares an organisational culture and set of scale, low cost facilities in a way that ensures
values, particularly so in a growing diverse business. regulatory compliance and good environmental
This is an area of particular focus from 2014 to 2018 stewardship.
in our business model.
Science-backed innovation
Portfolio management Glanbia has three innovation centres, including

Financial Statements
A cornerstone of portfolio optimisation is the ability its global innovation centre in Ireland. The focus
to manage a portfolio of businesses and optimise of the Groups innovation agenda is customer or
available growth opportunities. Glanbia has consumer led, science-backed innovation.
demonstrated a strong track record of efficient capital This enables Glanbia to move up the ingredients
allocation and portfolio management over several value chain and deliver well researched patented
years. Our ability to use a variety of structures, including or branded products within our portfolio.
the joint venture model, has been key to this success.
Strong customer relationships
In the context of continued strong growth opportunities
Customer and consumer insights are key to
across the business, these capabilities will be critical
maintaining and growing our strong and enduring
to the delivery of sustainable long term growth.
relationships with key customers. In our B2B segment
Brand power there is an opportunity to harness the potential of
Integral to the strength of Global Performance Nutrition these business relationships further. In our B2C
(GPN) is consumer brand power giving this business segment consumer insights are integral to delivering
global category leadership. GPN has an unrivalled strong branded revenue growth and maintaining our
branded product offering, from pre-workout products top position as the global sports nutrition brand family.
to proteins, ready-to-drink formats (RTDs) to powders,
proven products to category changing innovation.
There is also an opportunity to channel the commercial
value of the Glanbia brand in the B2B arena, clearly
establishing with key customers what the Glanbia
brand stands for in terms of quality, innovation and
sustainability. In particular, Glanbia has access to large
milk pools, with supply chain visibility. This provides a
natural, good for you dairy ingredients base as well as
assurance around food quality and safety.

Scale to leadership
Glanbia has leading market positions in sports
nutrition, cheese, dairy ingredients, specialty non-dairy
ingredients and vitamin and mineral premixes. This
leadership is underpinned by strong brands, enduring
customer relationships, proprietary technologies, first
mover advantages and an effective organisation.
Glanbia is highly focused on maximising its current
leadership positions and driving on to leadership in
select other markets. This will be achieved, at a
market-by-market level, through a combination
of rigorous business focus and strategic investment
in organic growth and capabilities, complemented More information
by appropriate acquisitions & joint ventures and Understanding our business page 4
strategic alliances.

www.glanbia.com 27
OPERATIONAL
EXCELLENCE
ACHIEVING WORLD-CLASS PRODUCTION AND OPERATIONS

John Mutchler
US Cheese

Glanbia Performance
System (GPS)

In Glanbia, building operational


excellence is creating a strategic
advantage for our businesses.
By leveraging GPS all employees
can focus on reducing losses
and inefficiencies. GPS is an
internally designed work system
built from globally recognised
best practices in Lean and TPM.
In applying these simple and
effective processes, Glanbia
employees can increase the
relevance of what they do in
value for our customers.

Achieving breakthrough
results by unlocking the
full capability of our people
is the key to creating a
centre of operational
excellence in Glanbia.
The Glanbia Performance
System is the way we will
unlock that capability.

28 Glanbia plc 2013 Annual Report and Accounts


DIRECTORs REPORT

DETAILED BUSINESS REVIEW


Operations and financial review 30
Detailed risk report 38
Corporate social responsibility 42

www.glanbia.com 29
DETAILED BUSINESS REVIEW

Operations and financial review

Good results
and positive outlook

The Group delivered a good 2013 performance Total Group EBITA increased 5.6% (9.2%
Total Group revenue increased 8.0% constant currency) to 226.7 million (2012:
performance in 2013 (10.5% constant currency) to 3,282.6 214.6 million). This resulted in a modest
underpinned by our two million (2012: 3,038.1 million). This margin decline in the period of 20 basis
reflected positive revenue growth across points (10 basis points constant currency).
growth platforms, Global all four segments. Global Performance With EBITA growth of 23.2% (27.9%
Performance Nutrition and Nutrition revenue was strong, driven constant currency), Global Performance
Global Ingredients. almost entirely by volumes, while Global Nutrition was the key driver of overall
Ingredients and Joint Ventures & Group performance while Global
Overall, the outlook for the Group Associates revenue growth was also Ingredients and Joint Ventures &
for 2014 is positive. While Global positive, reflecting a combination of market Associates also performed well.
Performance Nutrition is expected to price increases and volume growth. Dairy Ireland saw a significant decline
continue to be the main driver of growth, in EBITA of 29.1% reflecting challenges
we expect solid performances across all in the Consumer Products Business Unit.
segments. On this basis, we are guiding
8% to 10% growth in adjusted earnings
Constant
per share on a constant currency basis Revenue currency
for 2014. m 2013 Change change
Global Performance Nutrition 655.3 +11.8% +15.7%
Global Ingredients 1,074.6 +8.0% +11.5%
Dairy Ireland 652.2 +3.4% +3.4%
Total wholly owned businesses 2,382.1 +7.7% +10.3%
Joint Ventures & Associates 900.5 +9.0% +11.2%
Total Group 3,282.6 +8.0% +10.5%

Constant
EBITA currency
m 2013 Change change
Global Performance Nutrition 70.6 +23.2% +27.9%
Global Ingredients 102.0 +4.0% +8.1%
Dairy Ireland 15.1 -29.1% -29.1%
Total wholly owned businesses 187.7 +6.2% +10.0%
Joint Ventures & Associates 39.0 +2.9% +5.3%
Total Group 226.7 +5.6% +9.2%

Constant
EBITA Margin currency
2013 Change change
Global Performance Nutrition 10.8% +100bps +100bps
Global Ingredients 9.5% -40bps -30bps
Dairy Ireland 2.3% -110bps -110bps
Total wholly owned businesses 7.9% -10bps no change
Joint Ventures & Associates 4.3% -30bps -30bps
Total Group 6.9% -20bps -10bps

30 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Global Performance Nutrition

Detailed Business Review


Constant currency
2013 Change change
Revenue 2655.3m +11.8% +15.7%
EBITA 270.6m +23.2% +27.9%
EBITA margin 10.8% +100bps +100bps
2013 results The acquisition of Nutramino combined BRAND INTEGRITY
Global Performance Nutrition delivered a with a successful organic roll-out
strong performance in 2013. Revenues programme in 2013, brings our total
Global Performance Nutrition has

Governance
increased 11.8% (15.7% constant in-market sales presence to 19 countries our iconic brands Optimum
currency) to 655.3 million driven almost worldwide and further cements our Nutrition, BSN, ABB and Nutramino
entirely by volume growth as prices were position as the global leader in sports and each one of which shares five
largely unchanged in the period. Branded nutrition. fundamental attributes:
revenue growth was in excess of 20%. Premium consistently giving
EBITA increased 23.2% (27.9% constant Capital investment during 2013 was
the consumer a superior option
currency) during 2013 while margins significant. The implementation of SAP, the
to become part of their lifestyle,
increased 100 basis points to 10.8%. Groups financial and operational system,
serve as a status symbol and

Financial Statements
The increase in margin reflects a was successfully completed in October.
set the standard in the category;
combination of improved revenue mix and The new 234 million production facility in
somewhat lower input costs while we Chicago, designed to allow further Authentic a strong track
continued to invest in people and capacity additions on a modular basis, is record of credibility and category
infrastructure to support future growth of due to be commissioned in the second leadership, rooted in consumer
the business. quarter of 2014. We have already education and built on a foundation
commenced the second phase of capacity of proven results;
Global Performance Nutrition continued to expansion in this plant, reflecting recent Science-based continuously
outpace the overall market growth during demand trends and the continued positive inventing and reinventing category
2013 and we further increased our share growth outlook for the business. On leadership through consumer
within the USA. This performance was in completion, the total investment in insights, delivering consumer
the face of significant competition and the new facility will be approximately need-driven innovation;
reflects the strong appeal of our brands, 50 million. Highest quality stringent
our track record of delivering new and ingredient and manufacturing
innovative products and our continued 2014 outlook
state-of-the-art, NSF certified
investment in building the business. We Growth in Global Performance Nutrition
manufacturing facilities
also benefited from our focus on the continues to be underpinned by our brand
demonstrating an unrelenting
specialty and internet sports nutrition strength, our ongoing investment in the
commitment to superior quality;
sub-segments which remain the largest business and our focus on the large and
and
and among the fastest growing segments growing specialty and internet sports
in the market. nutrition market sub-segments. We Effective GPN products
continue to strengthen our many in-market do what they say.
International revenues also performed commercial teams and expect our
In all GPN brand positioning
well during 2013 and we continue to international businesses to continue to activities, including marketing,
make good progress in respect of our deliver strong growth. Overall we expect sales and product development,
international growth strategy. Global Performance Nutrition to deliver a legal compliance is of paramount
good performance for the year. importance.

www.glanbia.com 31
DETAILED BUSINESS REVIEW

Operations and financial review

Global ingredients
Constant currency
2013 Change change
Revenue 21,074.6m +8.0% +11.5%
EBITA 2102.0m +4.0% +8.1%
EBITA margin 9.5% -40bps -30bps
2013 results Ingredient Technologies Customised Solutions
Global Ingredients delivered a good Market prices for most of Ingredient The key users of premix solutions include
performance in 2013. Revenues increased Technologies dairy related products the beverage, breakfast cereal, infant
8.0% (11.5% constant currency) to declined in 2013. Lactose experienced formula, supplement and nutrition bar
1,074.6 million. This growth in revenue is quite significant declines with more segments. These markets continue to
attributable to underlying organic volume modest reductions for other whey related exhibit positive growth while premix
growth of 6.2%, higher pricing and an products. These declines were driven providers are also benefiting from the
enhanced product mix of 1.3% and the primarily by increased supply as demand ongoing trend towards food fortification
impact of acquisitions of 4.0%. across almost all products categories and the increasing desire of large
Acquisitions comprised of Aseptic remained firm. Demand continues to be multi-national food companies to
Solutions in July 2012 and a small underpinned by favourable trends across simplify their manufacturing processes
specialist cheese plant in Blackfoot, Idaho the relevant end markets including sports and supply chains.
in March 2013. EBITA increased 4.0% nutrition, nutritional bars and beverages,
(8.1% constant currency) in the period as infant formula and confectionary. Customised Solutions continues to benefit
positive performances in US Cheese and from these trends and performed well in
Customised Solutions offset a slightly In the context of declining market prices, 2013. Revenue growth was positive while
weaker performance in Ingredient Ingredient Technologies delivered a good margins were slightly ahead of the prior
Technologies. The 40 basis points (30 performance in 2013. Revenue growth year reflecting favourable sales mix.
basis points constant currency) decline in was positive as higher volumes more than
EBITA margins to 9.5% was driven offset the pricing impact. Volume growth We continued to invest in the business in
primarily by lower whey market prices in reflected the full year impact of the Aseptic 2013 aimed at growing our presence in
Ingredient Technologies. Solutions acquisition in July 2012 as well new markets, including sales teams in
as higher throughput of certain whey India, Russia, South Africa and Indonesia.
US Cheese products. Overall EBITA was behind prior This is consistent with aligning the
Cheese prices within the USA remained year as the impact of lower pricing on business with key growth customers with
relatively firm throughout 2013 margins more than offset the volume a particular focus on emerging markets.
underpinned by strong global dairy prices. growth.
Market demand growth was positive with 2014 outlook
retail, foodservice and exports all Ingredient Technologies continues to focus Global Ingredients is expected to have
performing ahead of the prior year. Against on maximising the value of its ingredient a solid performance in 2014. Our
this backdrop, US Cheese delivered a pool and in particular the development of Idaho-based US Cheese business is
solid performance in 2013. Revenues scienceled nutritional solutions and currently facing challenges related to
increased driven primarily by the Blackfoot systems. This relates not only to dairy- increased competition for milk. This is
acquisition and the impact of higher based ingredients but also to specialty expected to lead to higher milk costs and
market pricing. This growth in revenues grains where the recent commissioning of some year-on-year volume declines in
combined with a modest increase in our $22 million state-of-the-art specialty both US Cheese and Ingredient
margins resulted in positive EBITA grain processing facility in South Dakota Technologies relative to a strong volume
performance for the year. significantly enhances our capabilities. performance in 2013. While the situation
Also in 2013, we expanded our production continues to evolve, we are managing the
US Cheese commissioned its $8 million capabilities for lactoferrin and dairy overall impact with our suppliers and
Cheese Innovation Centre during 2013. calcium, two of our specialty dairy customers and, combined with a good
Based in Twin Falls, Idaho, this facility products used in a range of food and performance in Customised Solutions, we
together with the more flexible production other applications. expect Global Ingredients to deliver a
capabilities of the Blackfoot plant positive performance for the year.
significantly strengthens our innovation
and new product development
capabilities.

32 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Dairy Ireland1

Detailed Business Review


Constant currency
2013 Change change
Revenue
2652.2m +3.4% +3.4%
EBITA
215.1m -29.1% -29.1%
EBITA margin
2.3% -110bps -110bps
2013 results Agribusiness
Dairy Ireland had a difficult year in 2013 as On an overall basis, Agribusiness delivered
underperformance in Consumer Products a solid performance in 2013. Demand for

Governance
outweighed a solid performance in feed and fertilizer was strong in the first
Agribusiness. Revenues increased 3.4% half of the year, driven to a large extent by
to 652.2 million reflecting 2.5% organic poor weather conditions. While the
volume growth and 2.6% pricing growth demand trend weakened in the second
offset by the Yoplait franchise disposal in half of the year, particularly for feed, overall
2012 which had a 1.7% negative impact revenue growth for the year was positive.
on revenues. EBITA decreased by 29.1% Margins for the period were broadly in line
to 15.1 million with a 110 basis point with 2012 levels resulting in a positive

Financial Statements
decline in margins. EBITA performance overall.

Consumer Products The new state-of-the-art oats milling


In line with trends in global dairy markets, facility in Portlaoise was successfully
the average milk cost for Consumer commissioned in late 2013. The plant was
Products in 2013 was significantly ahead developed to supply milled oats for use in
of the prior year as Irish milk prices hit the premium US oatmeal brand, McCanns
record levels by historical standards. This Irish Oatmeal, owned by Sturm Foods. In
resulted in margin pressures as our ability addition, Agribusiness recently
to pass through these input cost increases commenced a restructuring programme,
in a difficult Irish retail environment was the aim of which is to increase efficiency
limited. Overall volumes declined modestly and optimise both its existing business
in the year but growth in private label potential and future growth opportunities.
business relative to branded business
resulted in an adverse mix effect. This, 2014 outlook
combined with lower margins, resulted Against the backdrop of an exceptionally
in a significant decline in EBITA. difficult 2013, we expect some
improvement in performance in Dairy
To counteract the challenges facing the Ireland in 2014. This will be driven
business, Consumer Products recently largely by Consumer Products,
announced a further phase of primarily reflecting the benefits of
rationalisation to improve its the rationalisation measures taken
competitiveness in the domestic market. in recent months.
This includes a reduction in the overall
cost base through the redesign of its
supply network and restructuring of
head-office functions. We also announced
plans to build a new 15 million UHT
(Ultra-Heat-Treated) facility to produce
long-life liquid milk and cream suitable for
export to markets such as China, Europe
and the Middle East. The new facility is
expected to be operational in the second
quarter of 2014.

1 Glanbia disposed of a 60% interest in Glanbia Ingredients Ireland Limited (GIIL)


in November 2012. GIIL, previously reported within the Dairy Ireland segment, is now a 40%
associate of the Group. A pro-forma adjustment has been made to the 2012 results to treat GIIL
as if it had been a 40% owned associate for the full year and all comparisons are with these
pro-forma figures.

www.glanbia.com 33
DETAILED BUSINESS REVIEW

Operations and financial review

Joint Ventures & Associates (Glanbia Share)1


Constant currency
2013 Change change
Revenue 2900.5m +9.0% +11.2%
EBITA 239.0m +2.9% +5.3%
EBITA margin
4.3% -30bps -30bps
2013 results Glanbia Cheese
Joint Ventures & Associates delivered The European mozzarella cheese market
a steady performance in the year. performed well in 2013 with demand
Revenues increased 9.0% (11.2% continuing to be driven by both the fresh
constant currency) to 900.5 million and frozen pizza markets. Market prices
reflecting 2.1% organic volume growth were also stronger reflecting demand
and 9.1% pricing growth. EBITA increased growth and the general increase in global
2.9% (5.3% constant currency) as positive dairy prices. In this context, Glanbia
revenue growth more than offset the 30 Cheese delivered a good revenue
basis point decline in margins. performance in 2013 and, while milk
costs also increased in the period,
Glanbia Ingredients Ireland (GIIL) EBITA growth was also positive.
Global dairy markets increased
significantly in 2013 as supply failed to Nutricima
keep pace with the continued strong While market conditions remain
demand from China and emerging challenging in the Nigerian market,
markets. In addition to strong price there were some signs of improvement
growth, GIIL also saw an increase in in demand in 2013 and overall volume
volumes in the period driven by favourable growth was positive for the year.
milk supply. Milk prices broadly reflected However, this benefit was largely offset
the increase in global dairy market prices by significantly higher input costs driven
and EBITA was largely unchanged in the in turn by higher global dairy prices.
year as a result. The positive trends in milk EBITA was largely unchanged in the
supply in 2013 are an early indication of period as a result.
the strong uplift in milk volumes expected
following the removal of milk quotas in 2014 outlook
2015. In this context, the 150 million Reflecting the expectation for broadly
processing facility under construction in stable performance in each of our joint
Belview, Co. Kilkenny is progressing well ventures & associates, this segment is
and is expected to commence expected to deliver a performance in
commissioning in late 2014. line with 2013.

Southwest Cheese (SWC)


While average cheese prices for 2013
were slightly ahead of the prior year, whey
prices on average were somewhat behind.
With SWC operating largely to capacity
from a volume perspective, the net effect
for SWC was a modest increase in
revenues and EBITA was broadly in line
with the prior year.

1 Glanbia disposed of a 60% interest in Glanbia Ingredients Ireland Limited (GIIL) in November
2012. GIIL, previously reported within the Dairy Ireland segment, is now a 40% associate of the
Group. A pro-forma adjustment has been made to the 2012 results to treat GIIL as if it had been
a 40% owned associate for the full year and all comparisons are with these pro-forma figures.

34 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Financial Review

Detailed Business Review


2013 summary Income Statement (pre exceptional)
Constant
currency
m 2013 2012 Change change
Revenue 2,382.1 2,211.8 +7.7% +10.3%
EBITDA 214.6 201.5
Depreciation/grant amortisation (26.9) (24.8)
EBITA 187.7 176.7 +6.2% +10.0%
EBITA margin 7.9% 8.0% -10bps No Change

Governance
- Amortisation of intangible assets (21.0) (19.9)
- Net finance costs (23.0) (20.4)
- Share of results of Joint Ventures & Associates 26.5 12.1
- Income tax (24.7) (25.5)
Profit for the year 145.5 123.0
Adjusted earnings per share (cents) 55.46 51.34 +8.0% +11.9%

Financial Statements
Revenue Share of results of Joint Ventures Adjusted earnings per share
Revenue grew by 7.7% to 2.4 billion & Associates Total adjusted earnings per share grew
(10.3% constant currency) reflecting The Groups share of results of Joint 8.0% (11.9% constant currency), driven by
continued strong organic growth in both Ventures & Associates increased by growth in EBITA combined with a lower
Global Performance Nutrition and Global 14.4 million to 26.5 million primarily due effective tax rate. Adjusted earnings per
Ingredients. to the inclusion of 12 months of the Groups share is believed to be more reflective of
share of Glanbia Ingredients Ireland Ltd the Groups underlying performance than
EBITA & EBITA margin (GIIL) compared to one month in 2012. basic earnings per share and is calculated
EBITA grew by 6.2% to 187.7 million 60% of GIIL was disposed of to Glanbia based on the net profit attributable to
(10.0% constant currency). EBITA margin Co-operative Society Ltd on 25th equity holders of the parent before
decreased by 10 basis points to 7.9%, November 2012. To assist comparability, exceptional items and amortisation of
with margin growth of 100 basis points in our segmental analysis in this section intangible assets, net of related tax.
Global Performance Nutrition offset by shows the revenue and EBITA of our Joint
reduced margins in the other segments. Ventures & Associates on a pro-forma Dividend per share
basis as if GIIL had been an associate for The Board is recommending a final
Net finance costs all of 2012. The table below reconciles the dividend of 5.97 cents per share (2012:
Net finance costs increased by 2.6 million pro-forma EBITA to the share of results as final dividend 5.43 cents per share). This
to 23.0 million due primarily to the shown in the Income Statement. represents an increase of 10% in the year
renegotiation of the Groups banking and brings the total dividend for the year
facilities in November 2012 (previously to 10.00 cents per share (2012: 9.09
renegotiated in May 2008). The Groups cents per share).
average interest rate for the full year was
5.1% (2012: 4.6%). Joint Ventures & Associates -
Reconciliation of pro-forma EBITA to share of results
Taxation
m 2013 2012
The 2013 tax charge decreased by 0.8 Pro-forma EBITA of Joint Ventures & Associates 39.0 37.9
million to 24.7 million which represents Reversal of pro-forma adjustment for GIIL (14.8)
an effective rate, excluding Joint Ventures
Reported EBITA 39.0 23.1
& Associates, of 17.2% (2012: 18.8%).
Amortisation (0.3)
The decrease in the effective rate is driven
Finance costs (4.2) (5.3)
by the change in mix and geographic
locations in which profits are earned. Income tax (8.0) (5.7)
Share of results as reported in the Income Statement 26.5 12.1

1 2012 profits relate to continuing operations only and so exclude Glanbia Ingredients Ireland Limited (GIIL) for the
period up to 25 November 2012. GIIL is included for one month (December) in 2012 as an associate and 2013
numbers include GIIL as an associate for the full year. 2012 results have been restated to reflect the adoption of
the revised IAS 19 pension accounting standard (see note 2 to the Financial Statements for full details).

www.glanbia.com 35
DETAILED BUSINESS REVIEW

Operations and financial review

Cash flow 2013 exceptional items


m
m 2013 2012 1.Revision to Group pension schemes 13.8
EBITDA 214.6 201.5
2.Rationalisation costs (8.0)
Dividends from Joint Ventures & Associates 10.9 13.8
3.Taxation charge (0.3)
Working capital movement (39.9) (59.1)
Total exceptional credit 5.5
Net interest and tax paid (55.8) (48.1)
Business sustaining capital expenditure (35.7) (30.1)
2013 exceptional items resulted in an
Other outflows (6.5) (13.2)
exceptional credit of 5.5 million. Details of
Free cash flow from continuing operations 87.6 64.8
the 2013 exceptional items are as follows:
Loans (to)/repaid by Joint Ventures & Associates 7.2 (3.3)
Strategic capital / acquisitions expenditure (76.5) (89.2) 1. Revisions to two of the Groups smaller
Disposals 8.5 26.6 defined benefit pension schemes
Restructuring costs (3.0) (6.5) resulted in a reduction in pension
Equity dividends (27.9) (25.3) liabilities and a consequent exceptional
Net cash outflow from continuing operations (4.1) (32.9) credit of 13.8 million. These revisions
Cash flow from discontinued operations 122.8 represent the final phase of the strategic
Cash flow pre currency exchange / fair value adjustments (4.1) 89.9 review of the Groups pension
Currency exchange / fair value adjustments 6.3 13.8 arrangements which has been carried
Cash flow for the year 2.2 103.7 out over the last number of years.
Net debt at the beginning of the year (376.6) (480.3) 2. Rationalisation costs amounting to
Net debt at the end of the year (374.4) (376.6) 8.0 million were incurred in Dairy
Ireland during the year. Consumer
Products announced a further phase
of rationalisation to improve its
competitiveness in the domestic market,
Free cash flow is after charging working Capital expenditure including a reduction in its central cost
capital movements and business Total capital expenditure during the year base and a redesign of its supply
sustaining capital expenditure, but before amounted to 112.2 million including network. Agribusiness also announced
strategic investments or divestments and 76.5 million of strategic spend. Major a programme to deliver cost base
equity dividends. projects completed during the year include savings while positioning the business
the Cheese Innovation Centre in US appropriately to take advantage
During the year the Group generated free Cheese, the specialty grains plant in of growth opportunities. These
cash flow of 87.6 million (2012: 64.8 Ingredient Technologies and the oats programmes will continue through
million) an increase of 22.8 million milling facility in Agribusiness. In addition 2014 when we expect to incur further
year-on-year. Higher EBITDA in 2013 of the final phase of SAP implementation was exceptional costs of approximately
214.6 million (2012: 201.5 million) and completed within Global Performance 211 million.
lower working capital investment in the Nutrition resulting in core SAP functionality 3. The tax charge applicable to exceptional
year were offset by increased business across the entire Group. Expansion of items 1 and 2 above amounted to
sustaining capital expenditure. The production capacity within Global 20.3 million.
working capital outflow of 39.9 million Performance Nutrition commenced in
reflects the increased working capital 2013 with expected completion of phase
requirements in Global Performance one in the second quarter of 2014. Our
Nutrition and Global Ingredients due to 2014 plans include capital expenditure in
strategic investment in inventories and the region of 120 million, of which
business growth. approximately 80 million will be spent on
strategic capital projects.

36 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Group financing Return on capital employed Financial risk management

Detailed Business Review


Financing KPIs The return on capital employed has The conduct of Glanbias ordinary
2013 2012
improved by 10 basis points to 14.2% business operations necessitates the
Net debt1:
(2012: 14.1%), a good performance given holding and issuing of financial instruments
adjusted EBITDA 1.7 times 1.7 times
the Groups organic investment programme and derivative financial instruments by the
Adjusted EBIT:
which has seen approximately 120 Group. The main risks arising from issuing,
net finance cost 7.8 times 8.1 times
million in strategic capital expenditure holding and managing these financial
(excluding acquisitions) over the past two instruments typically include liquidity risk,
1. Includes cumulative redeemable years. The Group operates to an internal interest rate risk and currency risk. The
preference shares. hurdle rate of return on investment Group does not trade in financial
2. The definition of adjusted EBITDA and decisions of 12% post tax, by year three, instruments. The Groups treasury policies
adjusted EBIT are as per our financing
and monitors investment spend against and guidelines are designed to mitigate
agreements and include dividends from
this metric.

Governance
Joint Ventures & Associates. the impact of fluctuations in interest rates
and exchange rates and to manage the
The Group delivered a year end net debt Pension Groups financial risks. These policies were
to adjusted EBITDA leverage ratio of 1.7 At 4 January 2014 the Groups net reviewed in 2013 by the Audit Committee
times (2012: 1.7 times) compared to the pension liability under IAS 19 (revised) and the Board.
Groups banking covenant of a maximum Employee Benefits, before deferred tax,
of 3.5 times. In 2013, adjusted EBIT to net reduced by 20.1 million to 78.0 million The Groups principal risks and
finance cost was 7.8 times (2012: 8.1 (2012: 98.1 million). This decrease in the uncertainties are outlined in the
Groups deficit reflected a 13.8 million

Financial Statements
times). The Groups banking covenant is a Detailed risk report on page 38.
minimum of 3.5 times interest cover. credit associated with revisions to two of
the Groups smaller defined benefit
The Group currently has three sources pension schemes, employer contributions
of committed debt finance totalling of 16.2 million offset by scheme charges
744.1 million: of 8.8 million and a small negative
movement in actuarial assumptions of
A $325 million (@238.4 million) private 1.5 million. The fair value of the assets of
placement of senior loan notes, due in the pension schemes at 4 January 2014
June 2021; was 346.5 million (2012: 332.6 million)
Bilateral multicurrency revolving loan and the value of the scheme liabilities was
facilities totalling @466.6 million with 424.5 million (2012: 430.7 million). The
eight banks, all maturing in January Group has applied IAS 19 (revised)
2018, which were renewed during 2012 Employee Benefits retrospectively in
on common terms and conditions; and accordance with the transition provisions
of the standard which resulted in an
Cumulative redeemable preference increase in profit after taxation for 2012 of
shares of 39.1 million due for 0.8 million and a resulting increase in
redemption in July 2014. adjusted earnings per share from 51.02
cents to 51.34 cents.

Net pension liability


m 2013
Beginning of year (98.1)
Actuarial assumptions (1.5)
Revisions to pension schemes 13.8
Employer contributions 16.2
Scheme charges (8.8)
Exchange differences 0.4
End of year (78.0)

More information
Finance Directors review page 16

www.glanbia.com 37
DETailed business review

DETAILED RISK REPORT

Risk management
across our business

Risk management responsibilities Group Operating Executive Risk management process


The Board has ultimate responsibility for Develops the organisational structure Our risk management process aims to
the Groups systems of risk management and is responsible for maintaining support the delivery of the Groups strategy
and internal control. However, there are effective risk management systems; by managing the risk of failing to achieve
defined roles within the process for the business objectives. We have a clear
Supports the Group senior leadership framework for identifying and managing
Audit Committee, the Group Operating
team in identifying, assessing and risk, both at an operational and strategic
Executive, Internal Audit and the Group
monitoring their respective risks and level. The framework is designed to ensure
Senior Leadership team. Key stakeholder
controls; and that there is input across all levels of the
risk management responsibilities are set
out below: Monitors business performance, risk business to the management of risk, to
exposure, mitigation and internal ensure we remain responsive to the ever
The Board controls. changing environment in which we operate.
Develops the Groups vision and By focusing our risk management system
strategic priorities; Internal Audit on the early identification of key risks, it
Provides an independent assessment of enables us to conduct a detailed
Defines the organisational Code of
the effectiveness of the Groups risk consideration of the existing level of
Conduct and culture;
management and internal control mitigation and the management actions
Sets the risk appetite and tolerance of systems; required to either reduce or remove the risk.
the Group in achieving its strategic If the reduction or removal of the risk is not
Consolidates Group risk reports for
objectives based on the possible, the Group formulates a
review by the Group Operating
recommendation of the Board management action plan to respond to the
Executive, the Audit Committee and the
Committees; and risk should the risk materialise. The risk
Board; and
Monitors the nature and extent of the management process is set out as follows:
Monitors and reports on actions taken
Groups principal risk exposures versus
by management to address risk
the defined risk appetite and tolerance. Group Senior Leadership Team,
exposures.
Business Unit / Functional Lead analysis
Audit Committee On a quarterly basis, each Business Unit
Group Senior Leadership Team
The Board has delegated the management team and functional lead is
Responsible for risk identification,
responsibility for reviewing the design requested to perform a detailed risk review
measurement, mitigation and assigning
and implementation of the Groups risk exercise and to complete the Group risk
risk management roles and responsibility
management and internal control register template. The template ensures
at operational level;
systems to the Audit Committee; and consistency of approach in reporting of
Ensures risk management processes risks and requires management to:
The Committee supports the Board in
and internal control systems are
monitoring risk exposure versus risk
embedded within each Business Unit; Classify each risk as financial,
appetite.
Monitors business performance and operational, strategic or regulatory;
uses risk management to support Assess the inherent risk impact,
decision making; and likelihood and velocity at which the
Encourages open communication on impact of the risk could materialise;
risk matters. Identify the mitigation measures (if
applicable), the residual risk and the
related management action plans; and
Allocate an owner who has responsibility
for assessing and managing the risk
exposure.

38 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
We are focused on ensuring that our systems of risk

Detailed Business Review


management and internal control operate effectively to
enable the timely identification, assessment and reporting
of the principal risks facing the business.
John Callaghan, Audit Committee Chairman

Consolidation and review of the Group On-going monitoring Market risk management
key risk summary reports Senior management are required when While we remain aware of competitor
Internal Audit prepares a Group summary presenting a business update to the Board activities and new innovations, our focus is

Governance
report based on the quarterly information or Audit Committee to provide detailed on enhancing our internal capabilities and
submitted by management. The Group presentations on their individual business strengthening our market offerings. During
Operating Executive reviews the reports unit key risks, the mitigating controls and 2013 key achievements included:
on a quarterly basis while the Audit the residual risk exposures.
Committee and the Board perform a Investing in a major expansion in
bi-annual review, with an interim update The Audit Committee continues to operate our Global Performance Nutrition
from management if significant issues a programme of evaluating key areas of production facility in Illinois, USA.
arise. The reports include: risk through a series of presentations from Commencing production in our

Financial Statements
management and Group functional South Dakota, USA specialty grains
An analysis of the key Group risks in experts on matters such as food safety processing plant, and our new oats
terms of impact (assessed over the and quality, operational site risk milling facility in Portlaoise, Ireland which
following 12 months within defined management and IT. will cater for our supply contracts with
monetary terms), likelihood of major US based customers and allow
occurrence (assessed based on defined Risk management activities in 2013
potential for future development.
probabilities of occurrence) and the Risk management is an evolving activity
speed at which the impact of the risk requiring effective planning and response Integration risk management
could materialise; to emerging risks. A number of key To support organic growth and the
achievements were noteworthy in 2013 integration of recent and future
A summary of the key movements in the
including the following: acquisitions, a Shared Services Centre
trend of risks identified;
Management action plans and owners was opened in Illinois, USA in early 2013
Effective talent management
to help manage the key residual risk and now processes the vast majority of
The Group is dependent upon the quality,
exposures; and the US based Business Units back office
ability and commitment of key personnel in
activity. The rollout of the Groups SAP
An overview of the broader order to sustain, develop and grow the
system across Global Performance
organisational and business risks. business in line with its key objectives.
Nutrition and Global Ingredients was also
During the year a re-organisation of the
completed in 2013, thereby enhancing
Board review Group senior management structure was
control systems and providing a platform
The focus of the Board is on ensuring completed. In November 2013, Siobhn
for future growth.
that the Group residual risk position is Talbot was appointed successor to John
within their risk appetite while the Group Moloney as Group Managing Director and Supply chain risk management
Operating Executive and the Audit Mark Garvey, previously CFO of Sara Lee Continued internal investment in enhanced
Committee, supported by Internal Audit, Corporation, replaced Siobhn Talbot as whey processing facilities, such as in
are entrusted with ensuring that Group Finance Director. As part of the Glanbia Ingredients Ireland Limited, has
appropriate measures are in place to restructuring of the Group segments, increased the Groups ability to extract
validate the strength of internal controls on 1 June 2013, Brian Phelan (appointed value from whey markets and helped to
and risk mitigation. to the Board on 1 January 2013) was ensure long term supply of quality whey
appointed as CEO of Global Ingredients protein in line with our customer
and Hugh McGuire was appointed to the commitments.
Board as Executive Director with
responsibility for Global Performance
Nutrition.

www.glanbia.com 39
DETailed business review

DETAILED RISK REPORT

Principal risks and uncertainties details of which are outlined in note 3.1
The performance of the Group in 2014 Financial risk factors on page 125 of this
will be influenced by: the global economic report. The Board regularly reviews these
outlook; milk availability and price in US policies.
Cheese; the challenging Irish retail
environment and the associated A summary of the key Group risks
management of margins within Dairy identified, potential impacts and mitigating
Ireland; and the effective execution of our actions are set out below. There may be
growth strategy in Global Performance other risks and uncertainties that are not
Nutrition and Global Ingredients. yet considered material or not yet known
to us and this list will change as risks
The Groups approach to financial and assume greater importance in the future.
taxation risks, including currency risk, Likewise some of these risks will drop
interest rate risk and liquidity risk, is to off the key risks schedule as mitigating
centrally manage these risks against management action plans are
comprehensive policy guidelines, implemented.

Risk Customer concentration risk


Certain key customers represent a significant portion of Group revenue and operating profits.
The loss of one or more of these customers could have a material impact on Group profitability.
Risk trend

Mitigation The Group has developed strong relationships with major customers by focusing on superior
customer service, product innovation, quality assurance and cost competitiveness. A new
medium term contract manufacturing agreement was entered into during the year with one
of our key Global Performance Nutrition customers which will strengthen our position in global
whey procurement markets and underpin our manufacturing capacity expansion in the USA.

Risk Supplier risk


Risk of not achieving an appropriate balance between sustainable milk supply and cost
with a resulting adverse impact on earnings. Milk availability can fluctuate from quarter to
quarter and year to year with resulting impacts on plant production levels. Volatile global
dairy commodity markets can compound the supply risk if the Groups ability to pass
pricing volatility back to the suppliers is constrained by competitive pressures or the
pricing method employed.
Risk trend

Mitigation Market pricing is continually evolving and the market environment can change very quickly.
As a result, our milk procurement strategy teams are working to ensure the business remains
competitive in its supplier offerings, which is in the interests of both our milk suppliers and
Glanbia. Management will continue to ensure that the focus is not solely on pricing but also
on the non-pricing value added initiatives that can be used to ensure continued
milk supply.

Risk Trends

No change

Risk declining

Risk increasing

40 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Risk Product safety and compliance risk

Detailed Business Review


A breakdown in control processes may result in contamination of products and/or raw
materials resulting in a breach of existing food safety legislation. Potential impacts include
reputational damage, regulatory penalties or restrictions, product recall costs, fines, lost
revenues and reduced growth potential. The sudden introduction of more stringent
regulations such as additional labelling requirements may also cause operational difficulties.

Risk trend

Mitigation The Group conforms to food safety and quality regulations and aims to employ best practice
across all its production facilities to maintain the highest standards by focusing on:
Employing suitably qualified and experienced staff;

Governance
Operating a supplier certification program whereby suppliers, their processes, facilities
and products are audited for conformance to Group standards; and
Monitoring overall food safety through the Glanbia Quality System (GQS) which is used
to assist management responsible for food safety. Results of GQS testing are presented
to and considered by the Audit Committee on an annual basis.
The Group also maintains product liability insurance.

Financial Statements
Risk Site compliance risk and environment, health & safety regulation risk
The risk of non-compliance with regulations pertaining to building and fire codes and/or
zoning restrictions resulting in a loss of capacity at a major site or a breach of environment
or health and safety regulations. Potential impacts include reputational damage, regulatory
penalties and an inability to service customer requirements.

Risk trend

Mitigation The Group limits the risk of a major event impacting operations or the environment by:
Monitoring overall safety and loss prevention performance through the Glanbia Risk
Management System (GRMS). This system assists operational management responsible
for site risk. An independent risk manager conducts the GRMS reviews, the results of
which are presented to and considered by the Audit Committee on an annual basis;
Continual investment in energy efficiency advancements, carbon reduction and emission
management programmes to ensure compliance with environmental regulations;
Ensuring all business operations have business continuity plans in place including
identification of alternative production locations where relevant. The benefits of this
were highlighted following a significant fire in early 2014 at our Irish Shared Services facility
where disruption levels were minimised; and
Maintaining a comprehensive insurance programme for all significant insurable risks and
major catastrophes.

Risk Talent management risk


The Group is dependent upon the quality, ability and commitment of key personnel
in order to sustain, develop and grow the business in line with its key objectives.
Growth targets may be at risk by failing to attract, retain and manage key personnel.

Risk trend

Mitigation The Group has put in place strong recruitment processes, effective HR policies and
procedures, long-term incentives, robust succession management planning and a range of
talent management initiatives including the Group management development programme.
The Group has and will continue to put significant focus on developing its graduate
recruitment programme. Recruiting talented, motivated, young professionals allows
the Group to train and develop future business leaders in line with the Groups mission
and business objectives.

www.glanbia.com 41
DETailed business review

corporate social responsibility

focused on Our
responsibilities

Glanbia is focused on Our People In Dairy Ireland, while overall employee


numbers for 2013 remained broadly
corporate social responsibility Glanbias people strategy is to attract and unchanged, a reorganisation took place
in three areas our develop high calibre talented people who in both Business Units, in the context of a
are committed to growth, innovation and challenging business environment. Where
employees, the environment success. The Group fosters a culture Consumer Products has had a reduction
and our local communities. where employees and teams are in numbers in some areas under the
challenged to create new ways to add reorganisation programme, investments
We respect and engage with our value to our products and services for in the new Ultra-Heat-Treated (UHT)
employees, recognising that their customers. Consumer Products facility and regional
commitment is central to our success. depots has created additional
Glanbia provides a positive working employment opportunities. Agribusiness
We are committed to environmental
environment that gives employees the is reorganising elements of its workforce,
stewardship, which is critical to
opportunity to share insights and aimed at optimising its existing business
managing food safety and quality
collaborate on many significant projects. and future growth potential.
as well as managing our potential
Energy, enthusiasm and fresh ideas are
environmental impact. We work with
welcomed and supported in the Groups Talent development
and support our local communities
drive to achieve its strategic goals. Glanbia has a number of programmes
through corporate donations, employee
volunteering and fundraising. and initiatives to develop its employees
Building organisational capabilities and manage its talent base.
Group employee numbers, including Joint
Ventures & Associates increased by 331 People development
people in 2013 to 5,202 people based in Fostering employee ingenuity and
32 countries. The largest areas of growth creating a culture of continuous learning
were in Global Ingredients and Global are core components to Glanbias
Performance Nutrition reflecting the two employee development initiatives.
global platforms that are the key strategic Through engagement with the
focus of the Groups growth ambitions. performance management process, all
Group employees are not only measured
Global Performance Nutrition (GPN) on performance and career potential but
increased employee numbers by 132 crucially have development areas
people in 2013. Strong business growth identified and supported by specific and
created new salaried and factory based targeted programmes.
positions in the Aurora, Illinois location.
GPN has established a new Europe, The tracking and measurement of HR
Middle East and Africa (EMEA) head office metrics is now transparently available on
in Dublin, Ireland, to support its significant a real-time dashboard which compares
international expansion. HR KPIs across the Business Units,
such as headcount, employee turnover
Global Ingredients, which encompasses and the management of compliance with
US Cheese, Ingredient Technologies and performance and succession
Customised Solutions, increased its management processes.
workforce by 231 people. Key to this
growth was Ingredient Technologies, which The Glanbia Management Development
commissioned a new specialty grain Programme (GMDP) is run annually for
processing facility in South Dakota in selected high potential managers. In
November 2013 and acquired Aseptic 2013, 27 managers from all the Groups
Solutions in 2012. US Cheese acquired the Business Units participated in an intensive
Blackfoot plant in Idaho and also opened two week programme split between
the Cheese Innovation Centre alongside its Dublin and Chicago.
new headquarters in Twin Falls, Idaho.

42 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
I believe Glanbias success is built on the talent of our

Detailed Business Review


people who are innovative and pioneering, whether it
is about improving performance, collaborating with
customers or building new markets.
Siobhn Talbot, Group Managing Director

Here they worked to solve business critical to address specific business and personal In US Cheese, Achieve Global is
projects which ensured active learning of challenges and are facilitated by a comprehensive leadership skills
the strategic thinking and leadership skills internationally approved and accredited development program that combines core

Governance
which were provided by world class active learning methods and teachers. leadership principles with cutting-edge
thought leaders. strategies to maximise team effectiveness
In Consumer Products, the senior and motivation. During the year, 140
Learning is enhanced in a competitive management team participated in a employees benefited from Achieve Global
environment and most projects have leadership development workshop in 2013 training. US Cheese has also adopted the
already been moved to implementation. to highlight the behaviours required for well established Five Choices to
Projects varied from Supply Chain strong focused leadership, while recently Extraordinary Productivity programme and
efficiency initiatives and business big data appointed managers participated in a six 35 employees across all levels took the two

Financial Statements
management to new product innovation week programme of coaching with particular day course in 2013.
technologies. Projects typically aligned focus on change management skills.
business strategy with strategic customer Glanbia Graduate Programme
requirements while taking into account During 2013, Agribusiness ran a number The intake to Glanbias Graduate
regulatory compliance, operational of leadership and management Programme continues to grow and
compatibility and the financial impact on development programmes which delivered 49 graduates were welcomed to the
the business. tangible benefits in both enhanced organisation in 2013. Successful applicants
leadership capability and sales performance. were hired from Ireland, the USA, China,
In addition to the Group development and Singapore, comprising 23 female and
programmes, there are specific people The strong emphasis on structured 26 male graduates.
development initiatives led by HR teams in technical training for the sales teams, aimed
Business Units. Typically, the objectives are at ensuring ongoing customer relevance, is During the year, 32 graduates from prior
to ensure that employees develop their delivered through external experts and year recruitment programmes assumed
skills and work effectively in their roles. internal technical specialists and is widely full-time roles in the Group. They will
Development programmes are designed recognised as industry best practice. continue their career development in

making a difference

At Glanbia, we know that our success Ability to be flexible in a fast


is built on our peoples capability. We paced global environment;
believe in a learning environment where Clear accountability and delivering
employees are challenged to innovate on our commitments; and
and find a better way to solve
Personal integrity and trust in
problems and deliver business results.
team-based working.
The Glanbia Performance System is a
good illustrative example of this as are In return, Glanbia promises to:
the GPN internal innovation awards. Reward performance and
Glanbia actively fosters a dynamic and recognise contribution with
results oriented culture because we competitive remuneration;
recognise that to achieve our vision we Provide opportunities for career
need Great People. development across the business;
and
All our employees are encouraged
to Make a Difference through: Offer custom-designed personal
and business skills programmes.
High energy performance;
Constant innovation in
work processes;

www.glanbia.com 43
DETailed business review

corporate social responsibility

finance, engineering, innovation and Key areas highlighted during the Health and safety
sales and marketing teams throughout conference were cross Business Unit During 2013, Glanbia Business Units
the Group. collaboration and leveraging current continued their concerted efforts to raise
capabilities to create long term safety awareness on all sites. The Groups
To complement the Group Programme, profitable growth. safety record has been excellent over
Business Units also hire graduates to fulfil recent years.The safety and risk
their specific business needs. These As always, there were some inspiring management process is audited both
graduates will be given the opportunity to guest speakers, including case studies in internally and by a third party to
participate in similar personal development innovative thinking and pragmatic strategy independently score all sites on the
and can avail of cross functional learning implementation. The conference is an Glanbias Risk Management System
and rotation within their Business Unit important opportunity for the leadership (GRMS). Awareness initiatives across
departments and operational sites. team to mingle in an informal setting which the Group in 2013 were:
ensures sharing of best practice and
Management conference forging cross business relationships. In Global Performance Nutrition, a
The 2013 Glanbia Management Awards were presented to leadership total of 871 employees were trained in
Conference was held in Chicago. The teams from several Business Units for Environmental Health and Safety general
theme was Strategy in Action Delivering projects ranging from commercialising awareness and a cohort of 357 of these
to High Expectations and almost 100 new product development to delivery of completed further specialised training in
members of Glanbias Senior Leadership sustained year-on-year growth using the areas such as electrical safety awareness.
Team reviewed the development of Group can-do culture fostered by the business.
business and strategy.

US CHEESE INITIATIVE

In 2013, US Cheese ran a safety


logo design contest. The safety team
selected Amanda Braun (pictured with
Patrick Cantrell) as the winner from 45
contestants. Amanda, a maintenance
operative in the Gooding cheese plant,
has since taken up a regulatory
compliance role in the Richfield
Whey Plant.

I really enjoyed working on


the safety logo and was
thrilled to win and see
my logo adopted in my
Business Unit.
Amanda Braun,
Regulatory Compliance Specialist,
Richfield Whey Plant.

44 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
We are proud of our track record in sustainability, driven by

Detailed Business Review


science, investment and the can-do entrepreneurial attitude
of our great workforce.
Jeff Williams, CEO, US Cheese

In US Cheese, a culture of safety has been manufacturing industry into operational US Cheese was recognised by Idaho
instilled at all levels of the business. Safety principles to deliver breakthrough results. Power as being one of the top Idaho
is one of four non-negotiables of the companies working to improve energy

Governance
Glanbia Performance System (GPS). As a Collaboration, shared learning and the efficiency. Over the past several years
result of the safety policies and initiatives, identification of best practices across Glanbia has invested in energy efficiency
supported by the awareness programme, the Group is key to the success of GPS. upgrades that currently save three million
the Recordable Incident Rate (RIR) has Since its launch by the Group in 2010 kilowatts annually which is enough
steadily reduced since 2010 to well below the implementation of the system has electricity to power 750 homes each year.
the U.S Bureau of Labour Statistics generated significant savings and US Cheese has participated in Idaho
national average RIR for the cheese improvements in safety, sustainability Powers Efficiency Programme since 2007
industry. and employee engagement. 95% of US saving over 12 million kilowatts to date.

Financial Statements
Cheese employees have been through a Energy usage per litre of milk processed
Glanbia Ingredients Ireland Limited (GIIL) GPS bootcamp and in 2013 over 100 declined slightly in 2013 while the volume
launched their STAR Health & Safety projects were completed leading to of milk processed increased.
Programme Stop-Think-Act-Review, savings across the business. A significant
the purpose of which is to change safety development is the move from the earlier Customised Solutions
behaviour and to embed this change into behavioural based Lean thinking to the In comparison to dairy processing facilities,
the culture. To increase awareness, a new current ownership phase where premix blending is less energy intensive.
ZERO HARM campaign and logo were employees are leading process and safety Sustainability initiatives are also in place
introduced. In October 2013, GIIL ran a improvement. The rollout of GPS has with a focus on energy and water
very successful Safety Week in conjunction continued with employees from Blackfoot consumed. Energy consumption fell in the
with European Health and Safety Week. (US Cheese), Aseptic Solutions (Ingredient US and China plants with a 14% electricity
Technologies) and Agribusiness (Dairy reduction per kilogram blended compared
Ireland) taking part in GPS bootcamps in to 2012. A new best-in-class hygiene and
The environment 2013. Bootcamps provide a rapid quality standard resulted in an increase in
overview and introduction to GPS and energy consumption in Orsingen,
Glanbia processes approximately 6 billion allow employees to have a hands-on Germany, however water consumption per
litres of milk annually in Ireland and the experience of utilising the programme and kilogram blended fell by 30%. In China, the
USA in our wholly owned businesses and understanding the management Suzhou plant experienced an increase in
Joint Ventures & Associates. It is within philosophy involved. water consumption per kilogram blended
these large scale facilities that our most of 7.6% due to a production volume
significant sustainability initiatives are Global Ingredients increase of 48%.
undertaken. While there is an onus on As water is such a valuable resource in
achieving regulatory compliance and Idaho, we prioritise the remediation of Joint Ventures & Associates
strong environmental standards, the constituents in wastewater through Energy and water usage also continued to
businesses also focus on sustainability and treatment and the land application of be the primary focus at our strategic US
environmental leadership. This ensures wastewater for crop irrigation. Through joint venture, Southwest Cheese. In 2013
that efficient and environmentally friendly GPS projects at Idaho facilities, Glanbia this facility reduced energy usage by close
principles run through all aspects of the has realised a reduction of wastewater to 3%. A 5% decrease in water usage
business from supply through to constituent concentrations of 16% between was also achieved despite increased
distribution chains. 2012 and 2013. 100% of the water used to throughput of milk. During the year
irrigate crops on Glanbias 2,200 acre farm Southwest Cheese began the process of
Sustainable practices are essential in has been extracted from milk that is returning surrounding farmland into natural
maintaining our supply chain and ensuring processed into cheese and whey products. grassland. The natural grassland will
high quality ingredients. These practices The farm grows corn and hay which is used require no additional water and will prevent
also generate financial benefits, increasing to feed the cows at local dairies. These soil erosion.
efficiencies and driving innovation and new dairies then provide milk back to the cheese
ideas in the work place. Lean principles and whey facilities in a sustainable cycle. Glanbia Ingredients Ireland Limited (GIIL),
are integrated into operational, our Irish dairy processing associate, was
management and strategic activities accepted as a verified Bord Bia Origin
through the customised Glanbia Green active partner in 2013. This
Performance System (GPS). The GPS is programme sets out targets for reductions
the Groups integrated work system which in carbon emissions, energy, water and
incorporates best practice from the global waste up to 2020.

www.glanbia.com 45
DETailed business review

corporate social responsibility

It also sets out to source ingredients from Our Community In the USA, through a combination of entry
sustainable sources and to enhance fees, sponsorships and individual
biodiversity on processing sites. Across the Group, we are involved in a donations, the Glanbia Charity Golf
number of local and international projects Challenge contributed a record breaking
GIIL sites continue to progress the Delta/ that seek to make a tangible difference in $145,000 to 10 Idaho-based charities in
Lean Programme and a number of energy local communities where we operate. 2013. The Charity of Choice for 2013
and water saving opportunities have been was The Idaho Foodbank which received
identified to help meet targets. The Corporate giving $38,000 for their Backpack Programme.
programme has delivered significant Since 2008 Glanbia has proudly partnered The Foodbank is the largest distributor of
energy reduction in whey processing in with Barretstown as the designated charity free food assistance in Idaho.
2013. Zero waste to landfill was fully of choice in Ireland. Barretstown helps
achieved in 2013. In addition, GIIL was the children with serious illness to regain their David Proctor of The Idaho Foodbank
first dairy processor in the world to achieve confidence and self-esteem through said: The Backpack Program provides
the Carbon Trust Water Standard for therapeutic recreation and camps. Glanbia nutritious, kid-friendly food to thousands of
achieving water reduction targets. fundraising means that Barretstown is Idaho children who are at risk of hunger
reaching even more families with camp between school lunch on Friday and
capacity increasing by 75% since 2008. In school breakfast on Monday. Some 400
the past five years Glanbia has donated children from 23 different elementary
1.6 million to Barretstown. This equates schools in the Magic Valley received
to almost 3,500 camp days for children backpacks during last school year.
and their families or the equivalent of 19
family weekend camps and has made
a tangible difference to the lives of over
350 families.

Tour de Kilkenny

The fifth Tour de Kilkenny, which is run


in conjunction with the Marble City
Cycling Club, took place in August
2013. Since it was established, the
cycle has raised a total of 45,000 for
Barretstown. 700 cyclists completed
the 2013 cycle and all proceeds went
to four charities - Barretstown, Relay for
Life Irish Cancer Society, The Irish
Pilgrimage Trust and Camphill
Communities of Ireland.

46 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
As a global performance nutrition and ingredients group, it is

Detailed Business Review


appropriate that Glanbia is associated with a variety of health and
sports initiatives that reflect the breadth of our brands, the diversity
of our locations and our values as an organisation.
Hugh McGuire, CEO, Global Performance Nutrition

Employee fundraising and volunteering A GPN team participated in the 15th


The biggest Irish based employee annual Hustle Up the Hancock, the find out more
fundraising initiatives come from two stair climb race of the 94 floors of the
events the annual Glanbia Hillwalk and John Hancock building, hosted by the

Governance
the Tour de Kilkenny cycle sportive. With Respiratory Health Association of
a cumulative height of over 11,000 metres, Metropolitan Chicago to support local
Glanbia climbs have raised 130,000 for lung disease research and programmes.
Barretstown in the past five years. In 2013,
the Twin Peaks Challenge involved Our employees also supported a number
climbing Irelands two highest mountains, of international charities:
Mount Brandon and Carrantuohill, on
20 GPN employees volunteered to pack

Financial Statements
successive days and over 31,000 was
raised. food for shipment to the Philippines and
Haiti for an organisation called Feed My
Starving Children which provides meals Careers
As part of the Skills@Work Programme,
specifically formulated for malnourished Glanbias global success is driven
Glanbia Agribusiness partnered with
children. by continuously investing in people.
Duiske College, Co. Kilkenny, to give
We offer a range of career paths for
Transition Year students greater insight into GPN also supplied Optimum Nutrition energetic and passionate people.
prospective career choices and further protein samples to a vendor taking part
study options. The programme included in a voluntary mission to Haiti. Protein More information
site visits, mock interviews, Day in the is difficult to source for many people www.glanbia.com
Life insights, group discussion sessions in Haiti and sample packets provided
with employees and curriculum vitae a quick and convenient way to help
writing skills. The Skills@Work Programme meet their nutritional needs.
is provided by Business in the Community
Ireland (BITCI).

In the USA there were several employee


fund-raising initiatives including:

Ingredient Technologies employees


participated in their own version of the
popular television show The Biggest
Loser. One dollar was donated to
charity for each pound lost by the
contestants while weekly seminars were
hosted to provide education on nutrition Sustainability
and maintaining an optimal workout The US Cheese and Whey
routine. businesses produced their
first sustainability report to
Customised Solutions Carlsbad-based share their journey of growth and
employees raised funds competing in sustainability. Their environmental
the Del Mar Mud Run Obstacle Race. footprint is amongst the lowest
All proceeds went to the Challenged per pound of product and they
Athletes Foundations (CAF) Operation are systematically continuing
Rebound, the premier sports and fitness to reduce their impacts while
programme for American military simultaneously strengthening
personnel, veterans and first responders the social and economic fabric
with permanent physical disabilities. of their local communities.

More information
www.glanbia.com

www.glanbia.com 47
science-backed
Innovation
DELIVERING competitive advantage in the market place

Eric Bastian PhD,


Ingredient Technologies

Collaborative Innovation

At Glanbia, innovation through


customer collaboration lies at
the core of our development
process. With the Collaboration
Center (CC) and the new Cheese
Innovation Center (CIC), we have
the ability to invite our customers
to come and work with us on
their most relevant projects.
In 2013, more than 50 of our
customers travelled to Idaho
to collaborate with our
development teams in the CC
and the CIC. Through that
collaboration, we were able to
complete many projects that not
only help Glanbia derive added
value, but give our customers
a competitive edge in the
marketplace.

As a leading supplier of


nutritional products and
cheese, Glanbia has
been at the forefront of
collaborative, dairy
innovation for more
than two decades.

48 Glanbia plc 2013 Annual Report and Accounts


DIRECTORs REPORT

GOVERNANCE
Governance overview 50
Board of Directors and Senior Management 52
Audit Committee report 60
Nomination Committee report 66
Remuneration Committee report 70
Statement of compliance 89
Other statutory information 98
Statement of Directors responsibilities 101

www.glanbia.com 49
Governance

governance overview

committed to
strong governance

Dear Shareholder, Board time allocation


Your Board is committed to strong governance and its The Board met 11 times during the year and I work
view continues to be that the right processes and closely with the Group Managing Director and the
people are in place at Glanbia. I am pleased to Group Secretary to make sure that the agenda is
introduce our key achievements during the past year focused on the correct areas. I believe we strike the
and in the governance section you will find detailed right balance.
Board Committee and Corporate Governance reports.
To be effective, our Directors need to have a deep
Board evaluation understanding of the business and this feedback is
During 2013 we undertook an externally facilitated regularly received in Board evaluations. This is
evaluation of the Board, the purpose of which was to particularly important given the increasingly global
review and improve the Boards performance and nature of Glanbias operations. Therefore, one of the
identify its development needs. This has been a key activities of 2013 was a Board visit to the USA
thorough process carried out by Karl Croke of Board in September 2013. Over the course of four days,
Works. Karl is an experienced independent the Board received detailed presentations from all
practitioner who has no other connection to Glanbia. international Business Unit management teams.
The overall outcome of the evaluation was positive, We also conducted reviews of those units. The Board
with the Boards performance being rated as very also visited Aseptic Solutions in Corona, California
good, citing strong cohesiveness, collaboration, trust which was acquired in July 2012 and the Customised
and efficiency. Solutions manufacturing facility in Carlsbad, California.

The outcome of the evaluation was presented to the Board changes


Board and a number of recommendations were made 2013 was another year of change for the Board.
to further improve the effectiveness of the Board. The Siobhn Talbot succeeded John Moloney who retired
recommendations related to the following key areas: from the Board on 12 November 2013 as Group
Managing Director. We appointed three new Executive
Board refreshment and renewal; Directors, Brian Phelan, Hugh McGuire and Mark
Garvey. Two new Non-Executive Directors were
Orderly reduction in the number of Glanbia
appointed, Donard Gaynor and Vincent Gorman and
Co-operative Society Limited (the Society)
three Non-Executive Directors left the Board, Billy
nominated Board members on a phased basis
Murphy, Robert Prendergast and Brendan Hayes.
over the period to 2018; and
These changes are dealt with comprehensively in the
Enhancing the existing processes in place for Nomination Committee report on pages 67 to 68.
Director development and senior management
succession. In accordance with the UK Corporate Governance
Code (2012), all the Directors, excluding Jerry Liston
A full description of the Board evaluation process is who has indicated he will retire at the commencement
set out in our Statement of Compliance on page 97. of the Annual General Meeting (AGM), will stand for
re-election at the 2014 AGM. Each Director continues
to provide the Board with valuable knowledge and
expertise and to devote sufficient time in support of
Allocation of board time the Group, and I strongly recommend their re-election.

Risk management and internal controls


Strategy Risk management continues to be the focus of much
Operational and attention. The Board and management are satisfied
financial performance that appropriate risk management and internal control
Risk Management systems are in place throughout the Group and
Corporate development the principal risks which Glanbia face are set out in the
Investor relations Detailed Risk Report on page 38. While the Board
retains ultimate responsibility for determining the
Other
Groups risk appetite, it has delegated responsibility
for reviewing the design and implementation of the
Groups management and internal control systems to
the Audit Committee.

50 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
As we continue to successfully develop

Detailed Business Review


our growth strategy, your Board is very
mindful of the central role that strong
corporate governance plays.

Remuneration and reporting Committee and the Board welcomes 7% of the Companys issued share capital
In 2013, the UK Department of Business, shareholder feedback and input on any to its members. Combined, these
Innovation and Skills (BIS) published aspect of remuneration and particularly transactions increased the free float to 59%.

Governance
wide reaching proposals referred to as the given our proposed review of remuneration
2013 Remuneration Regulations. In line policy in 2014. During 2013, we met with more than 150
with these regulations, we have taken buy and sell side representatives and held
further steps to enhance our reporting by We have also taken the opportunity to a dedicated investor day at the London
updating the format of the Remuneration restructure this Annual Report with regard Stock Exchange in May 2013, at which
Committee report this year, although as an to BIS requirements for enhanced and I and our Senior Independent Director
Irish incorporated company Glanbia is not simpler reporting, in particular including a attended. The focus of the presentations
subject to the Remuneration Regulations. strategic report which covers the most was Global Ingredients and Global

Financial Statements
Under UK company law, there is a material information on our performance Performance Nutrition, the Groups two
requirement to submit the Remuneration and future prospects. growth platforms. The AGM is also an
Committee report for the year to an opportunity for the Board to engage with
advisory vote and the Groups remuneration External Auditors shareholders. The 2014 AGM will be held
policy on Directors pay to a binding vote by Following the publication of the revised UK at the Lyrath Estate Hotel, Old Dublin
shareholders. However, given the different Corporate Governance Code (2012), the Road, Kilkenny on 13 May 2014. Further
legal jurisdiction in which Glanbia operates, recent findings of the Competition details of our Investor Relations activities
and consistent with our approach last year, Commission, the Guidance for Audit during the year are on page 17.
Glanbia is proposing to seek these approvals Committees issued by the Financial
in a single advisory vote by shareholders Reporting Council and the EU Audit Conclusion
rather than on a binding basis at the AGM Reform Framework proposals, we have Your Board will continue to work to ensure
in 2014. The Board will take due notice of taken the opportunity to review that the right corporate governance
any shareholder feedback on the policy and arrangements with our external Auditors. oversight and processes are in place to
it is the Boards intention to operate in line This is to ensure the continued develop growth initiatives and support
with the approved policy. independence and objectivity innovation and entrepreneurship, while at
of our external Auditors and that our the same time managing and mitigating
As part of our three year remuneration relationship with PricewaterhouseCoopers the associated potential risks, so that we
policy cycle, during 2014 the remains satisfactory. protect all our stakeholders. I welcome any
Remuneration Committee will review the feedback and encourage shareholders to
Directors remuneration policy. In addition, Shareholder engagement write to me at any time should they have
we will consider the Remuneration Late 2012 and early 2013 saw the any matter they wish to discuss.
Regulations and where deemed expansion of our shareholding base with
appropriate we intend to refine and the successful completion of two private
develop the Remuneration Committee placements for 6% of the Companys
report to further enhance clarity and issued share capital by the Society.
transparency. The Remuneration In March 2013, the Society also distributed Liam Herlihy,
Group Chairman

BOARD COMMITTEES

Audit Committee Nomination Committee Remuneration Committee

John Callaghan, Liam Herlihy, Jerry Liston,


Audit Committee Chairman & Group & Nomination Remuneration Committee
Senior Independent Director Committee Chairman Chairman
See page 60 See page 66 See page 70

www.glanbia.com 51
GOVERNANCE
Governance

Board of directors and senior management

Group Chairman and Vice-Chairmen

Martin Keane, Vice-Chairman Liam Herlihy, Group Chairman Henry Corbally, Vice-Chairman
Martin Keane (aged 58), Vice-Chairman, Liam Herlihy (aged 62), Group Chairman, Henry Corbally (aged 59), Vice-Chairman,
was appointed to the Board on 24 May was appointed to the Board on 11 was appointed to the Board on 9 June
2006 and has served seven full years on September 1997 and has served 16 full 1999 and has served 14 full years on the
the Board. He was nominated for years on the Board. He was nominated Board. He was nominated for appointment
appointment by Glanbia Co-operative for appointment by Glanbia Co-operative by Glanbia Co-operative Society Limited.
Society Limited. Martin farms at Errill, Society Limited. Liam farms at Henry farms at Kilmainhamwood, Kells,
Portlaoise, Co. Laois and has completed Headborough, Knockanore, Tallow, Co. Co. Meath and holds a certificate of merit
the ICOS Co-operative Leadership Waterford and has completed the Institute in Corporate Governance from University
Programme. Martin is Vice President of of Directors Development Programme College Cork. He is a former Vice-
Irish Co-operative Organisation Society (2006) and holds a certificate of merit in Chairman of the National Dairy Council.
Limited and a board member of ICS Corporate Governance from University Member: Audit Committee /
Europaks Limited. He is a former Director College Dublin. He is a Director of Irish Remuneration Committee
of Co-operative Animal Health Limited. Dairy Board Co-operative Limited and
Member: Audit Committee / is a former Director of Irish Co-operative
Remuneration Committee Organisation Society Limited.
Chair: Nomination Committee
Member: Audit Committee /
Remuneration Committee

Pictured left to right:


Martin Keane, Liam Herlihy, Henry Corbally

52 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Executive Directors and Group Secretary

Detailed Business Review


Governance
Hugh McGuire, Siobhn Talbot, Brian Phelan,

Financial Statements
CEO Global Performance Nutrition Group Managing Director CEO Global Ingredients
Hugh McGuire (aged 43) was appointed to Siobhn Talbot (aged 50) was appointed Brian Phelan (aged 47) was appointed as
the Board on 1 June 2013 as an Executive as Group Managing Director on 12 CEO Global Ingredients on 1 June 2013,
Director with responsibility for Global November 2013, having been appointed having been appointed to the Board on 1
Performance Nutrition. Hugh joined the Group Managing Director Designate on January 2013 as Group Development and
Group in 2003 and has been Chief 1 June 2013. She was previously Group Global Cheese Director with responsibility
Executive Officer of Global Performance Finance Director where her role for strategy development and Global
Nutrition since 2008. Hugh was previously encompassed responsibility for Group Cheese. Brian was previously Group
CEO of Glanbia Customised Solutions and strategic planning. She has been a Human Resources & Operations
prior to that was CEO of Glanbia member of the Group Executive Development Director. He is the Chairman
Nutritionals across EMEA and ASPAC. Committee since 2000 and the Board of our Glanbia Cheese Joint Venture. Since
He previously worked for McKinsey & since 2009 and has held a number of joining the Group in 1993 he has held a
Company as a consultant across a range of senior positions since she joined the number of senior management positions.
industry sectors. Prior to this he worked in Group in 1992. Prior to joining the Group, Prior to this he worked with KPMG. He
the consumer products industry with Nestl she worked with PricewaterhouseCoopers graduated from University College Cork
and Leaf. Hugh graduated from University in Dublin and Sydney, Australia. A fellow with a Bachelor of Commerce and is a
College Dublin with a M.Sc. in Food of the Institute of Chartered Accountants fellow of the Institute of Chartered
Science. He has a Diploma in Finance in Ireland, Siobhn graduated from Accountants in Ireland.
from the Association of Chartered University College Dublin with a Bachelor
Michael Horan,
Certified Accountants. of Commerce and Diploma in Professional
Group Secretary
Accounting.
Mark Garvey,
Michael Horan (aged 49) was appointed
Group Finance Director
as Group Secretary on 9 June 2005,
Mark Garvey (aged 49) was appointed as having previously held the position of
Group Finance Director on 12 November Group Financial Controller since June
2013. Prior to joining Glanbia he held the 2002. He joined the Glanbia Group in
position of Executive Vice President & 1998 as Financial Controller of the Fresh
Chief Financial Officer until 2012 with Sara Pork business in Ireland. Michael
Lee Corporation, a leading global food and previously worked with Almarai Company
beverage company with operations in over Limited in Saudi Arabia and BDO Simpson
40 countries. Mark also held a number Xavier. A fellow of the Institute of Chartered
of senior finance roles in the Sara Lee Accountants in Ireland, Michael graduated
Corporation in the USA and Europe and from the National University of Ireland,
prior to that he worked with Arthur Galway with a Bachelor of Commerce.
Andersen in Ireland and the USA. A fellow
of the Institute of Chartered Accountants
in Ireland and the American Institute of
Certified Public Accountants, Mark
graduated from University College Dublin Pictured left to right:
with a Bachelor of Commerce and Hugh McGuire, Mark Garvey, Siobhn Talbot,
Diploma in Professional Accounting and Brian Phelan, Michael Horan; the members of
the Group Operating Executive.
has an Executive MBA from Northwestern
University, Illinois.

www.glanbia.com 53
Governance

Board of Directors & Senior Management

Non-Executive Directors

Jerry Liston John Callaghan, Paul Haran,


Non-Executive Director Senior Independent Director Non-Executive Director
Jerry Liston (aged 73) was appointed to John Callaghan (aged 71) was appointed Paul Haran (aged 56) was appointed to
the Board on 10 June 2002 and has to the Board on 13 January 1998 and has the Board on 9 June 2005 and has served
served 11 full years on the Board. He is a served 16 full years on the Board. Among eight full years on the Board. He is a
former Chief Executive of United Drug plc other positions he is currently Chairman of Director of a number of companies
(1974 to 2000). He commenced his career the Topaz Energy Group and Chairman of including the Mater Private Hospital and
with PJ Carrolls where he was responsible Harvest Energy (UK). Former positions he Irish Insurance. He also chairs the UCD
for brand management, following which he has held include Managing Partner of Michael Smurfit Graduate Business School
joined Warner Lambert Pharmaceuticals KPMG (Ireland) (1983 to 1991), Chief and Edward Dillon & Co. He is a former
and became General Manager Ireland until Executive and Director of Fyffes plc (1991 Director of Bank of Ireland, the Road
his appointment as Chief Executive of to 1993), Non-Executive Director of Esat Safety Authority, the Institute of Public
United Drug plc in 1974. He is also a Telecommunications Limited (1994 to Administration and the Qualifications
past Executive Chairman of the Michael 2000), Non-Executive Director/Chairman Authority of Ireland. He retired at the end
Smurfit Graduate Business School (2000 of First Active plc (1993 to 2004) and of 2004 as Secretary General of the
to 2005) and past Chairman of the Irish Non-Executive Director of Rabobank Department of Enterprise, Trade and
Management Institute, Balcas Timber Ireland plc (1994 to 2012). He is a fellow of Employment after a public sector career of
Limited, BWG Group Limited and the Irish the Institute of Chartered Accountants and almost 30 years. He graduated from Trinity
Aviation Authority, and a former Director of the Institute of Bankers, an associate College Dublin with a B.Sc. in Computer
National Toll Roads Limited. He graduated member of the Institute of Taxation and Science and also has an M.Sc. in Public
from University College Dublin with a former President of the Institute of Sector Analysis and an Honorary
B.A. (Economics) in 1961, studied Law Directors. Doctorate of Law, all from Trinity
at Kings Inn in 1962 and was called to College Dublin.
Chair: Audit Committee
the Irish Bar. Jerry was awarded an
Member: Nomination Committee / Member: Audit Committee / Nomination
MBA in 1968.
Remuneration Committee. Committee / Remuneration Committee
Chair: Remuneration Committee
Donard Gaynor,
Member: Audit Committee / Nomination
Non-Executive Director
Committee
Donard Gaynor (aged 57) was appointed
to the Board on 12 March 2013. Donard
retired in March 2012 as Senior Vice
President of Strategy and Corporate
Development of Beam, Inc., the premium
spirits company listed on the New York
Stock Exchange, based in Chicago,
Illinois. A Fellow of the Institute of
Chartered Accountants in Ireland, he
joined Beam in 2003 as Senior
Vice President and Managing Director
International. Prior to this he served in a
variety of senior executive leadership roles
Pictured left to right:
Jerry Liston, John Callaghan, Paul Haran, Donard Gaynor with The Seagram Spirits & Wine Group in
New York and was also Audit Client
Services Partner with the New York office
of PricewaterhouseCoopers.

54 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Non-Executive Directors Directors nominated by Glanbia Co-operative Society Limited

Detailed Business Review


Glanbia plc was formed in 1997 as a result of the merger of This number will reduce to eight Non-Executive Directors in 2018,
Avonmore Foods plc and Waterford Foods plc. As part of the more details of which is set out in the Nomination Committee
merger, Glanbia Co-operative Society Limited retains a major report. All of the Directors nominated for appointment by Glanbia
shareholding in Glanbia plc and nominates from its Board of Co-operative Society Limited are full time farmers who have
Directors, which is elected on a three year basis, up to 14 Non- significant expertise of the dairy and agricultural industry.
Executive Directors for appointment to the Board of Glanbia plc.

Governance
William Carroll Jer Doheny David Farrell Patrick Gleeson
William Carroll (aged 48) was Jer Doheny (aged 59) was David Farrell (aged 64) was Patrick Gleeson (aged 52) was

Financial Statements
appointed to the Board on 26 appointed to the Board on 29 appointed to the Board on 26 appointed to the Board on 24
May 2011 and has served two May 2012 and has served one May 2011 and has served two May 2006 and has served seven
full years on the Board. full year on the Board. full years on the Board. full years on the Board. He is
also a member of the Audit
Committee since 26 July 2011.
He has completed the University
College Dublin Diploma in
Corporate Governance.

Vincent Gorman Michael Keane Matthew Merrick John Murphy


Vincent Gorman (aged 57) was Michael Keane (aged 61) was Matthew Merrick (aged 62) was John Murphy (aged 51) was
appointed to the Board on re-appointed to the Board on appointed to the Board on 9 appointed to the Board on 29
27 June 2013 and has served 29 June 2010 and has served June 2005 and has served eight June 2010 and has served
less than one full year on three full years on the Board in full years on the Board. He is three full years on the Board.
the Board. the current term. He previously also a member of the Audit He also sits on the National
served two full years on the Committee since 26 July 2011. Dairy Council Board. He has
Board. He has completed the University completed the University
College Dublin Diploma in College Cork Diploma in
Corporate Governance. Corporate Direction.

Patrick Murphy Eamon Power


Patrick Murphy (aged 55) Eamon Power (aged 59)
was appointed to the Board on was re-appointed to the Board
26 May 2011 and has served on 26 May 2011 and has
two full years on the Board. served two full years on the
Board in the current term.
He previously served nine full
years on the Board.

www.glanbia.com 55
Governance

Board of Directors & Senior Management

key matters reserved to the board 2013 Board meeting attendance

Number of full
Group strategy and business plans,
years 2013 meeting
including responsibility for the overall Director Appointed on the Board attendance
leadership of the Group;
L Herlihy 11 September 1997 16 11/11
Approval of the Groups strategic plan,
oversight of the Groups operations and review Mn Keane 24 May 2006 7 11/11
of performance in the light of our strategy, H Corbally 9 June 1999 14 11/11
objectives, business plans and budgets, and
S Talbot 1 July 2009 4 11/11
ensuring that any necessary corrective action
is taken; J Callaghan 13 January 1998 16 11/11
Acquisitions, disposals and other transactions W Carroll 26 May 2011 2 11/11
outside delegated limits;
J Doheny 29 May 2012 1 11/11
Financial reporting and controls, including
approval of the half-yearly report, interim D Farrell 26 May 2011 2 11/11
management statements and preliminary M Garvey 12 November 2013 Less than 1 2/2
announcement of the final results, approval
D Gaynor 12 March 2013 Less than 1 10/10
of the Annual Report and Financial Statements,
approval of any significant changes in P Gleeson 24 May 2006 7 11/11
accounting policies or practices, and ensuring V Gorman 27 June 2013 Less than 1 6/6
maintenance of appropriate internal control
and risk management systems; P Haran 9 June 2005 8 11/11
Capital expenditure, including the annual B Hayes(1) 29 June 2010 3 5/5
approval of the capital expenditure budgets Ml Keane (2)
29 June 2010 5 11/11
and any material changes to them in line with
the Group-wide policy on capital expenditure; J Liston 10 June 2002 11 11/11
Dividend policy, including the annual review of H McGuire 1 June 2013 Less than 1 6/6
our dividend policy and declaration of the M Merrick 9 June 2005 8 11/11
interim dividend and recommendation of the
final dividend; J Moloney(3) 11 September 1997 16 9/10
Appointment of Directors; J Murphy 29 June 2010 3 11/11
Shareholder documentation, including P Murphy 26 May 2011 2 11/11
approval of resolutions and corresponding W Murphy(4) 1 June 1989 24 5/5
documentation to be put to shareholders and
approval of all press releases concerning B Phelan 1 January 2013 1 11/11
matters decided by the Board; and E Power(5) 26 May 2011 11 11/11
Key business policies, including approval of R Prendergast(6) 28 May 2008 5 5/5
the remuneration and treasury policies.
K Toland (7)
10 January 2003 11 0/0

(1) Resigned 5 June 2013


(2) Ml Keane was appointed to the Board in 2010 having previously served
two years on the Board.
(3) Retired 12 November 2013
(4) Retired 1 June 2013
(5) E Power was re-appointed to the Board in 2011 having previously
served nine years on the Board.
(6) Resigned 5 June 2013
(7) Resigned 5 January 2013

56 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Composition of the Board key responsibilities of officers

Detailed Business Review


at 4 january 2014
The Group Chairman is responsible for The Group Managing Director is
the efficient and effective working of responsible for all aspects of the
4
the Board and his particular operation and management of the
responsibilities include: Group and her particular
responsibilities include:
Leading the Board;
4 13
Providing accurate, timely and clear Leading corporate strategic decision
information to the Board; making and developing the Group
strategy for approval;
Promoting the highest standards of
corporate governance; Leading the Group;

Governance
Facilitating active engagement and Ensuring Group policies and
challenge by the Board; procedures are followed;
Non-Executive Directors Ensuring the business complies
nominated by Glanbia Acting as Chairman of the Nomination
Committee; with relevant legislation and
Co-operative Society Limited
regulation; and
Other Non-Executive Directors Conducting the annual Board
evaluation; and Overseeing investor relations.
Executive Directors

Financial Statements
Acting as a sounding board for the
Group Managing Director.

Directors Tenure on THE board The Senior Independent Director The Group Secretary assists the
at 4 January 2014 supports the Group Chairman on all Group Chairman in promoting the
governance issues and his particular highest standards of corporate
responsibilities include: governance and his particular
5 responsibilities include:
Acting as a sounding board for the
Group Chairman; Acting as a sounding board for
Acting as an intermediary for the Directors;
4 9
other Directors; Assisting the Group Chairman in
Conducting the annual appraisal of ensuring Directors receive timely
the Group Chairmans performance; and clear information and are
equipped for robust debate and
Acting as Chairman of the Audit informed decision making;
3 Committee;
Being a central source of guidance
Ensuring the views of the Non- and advice on policy, procedure,
Less than 3 years Executive Directors are heard; and governance and ethics;
Between 3 and 6 years Being available to shareholders.
Between 6 and 9 years
Ensuring compliance with all legal
and regulatory matters;
More than 9 years
Providing a high quality service to
shareholders; and
Co-ordinating access to independent
professional advice for Directors from
time to time.

www.glanbia.com 57
Governance

Board of Directors & Senior Management

Governance Framework

Glanbia has a clear governance framework, which supports


integrated decision making and risk management. The Board
has overall responsibility for the conduct of the Groups business,
setting of strategy and ensuring good governance practice and
systems are in place across Glanbia.

Board of Directors & secretary

Group Chairman/Vice-Chairmen, Executive Directors &


Non-Executive Directors, Group Secretary
Non-Executive Directors nominated by
Glanbia Co-operative Society Limited

See pages 52, 54, and 55 See page 53

Board committees Group Management

Audit Committee Group operating executive


Key activities: Review of Financial Statements This group is comprised of the Executive
and external Auditors independence, Directors and Group Secretary.
internal controls, risk management systems Key activities: Monitoring performance and
and the effectiveness of internal audit. making strategic recommendations to the
Board. This forum is also the Group
Risk Committee.
See page 60 See page 53

Nomination committee Group Management Committee


Key activities: Recommendations on This group brings together the Group
appointments to the Board, including Operating Executive, Business Unit
Group Chairman/Vice-Chairmen, Chief Executives and Group Corporate
succession planning, review of the Development Director and has responsibility
independence and time commitment for the delivery of Glanbias annual business
of Non-Executive Directors. plan and strategic priorities.
See page 66 See page 59

Remuneration Committee Group senior leadership team


Key activities: Review of Executive Directors This team includes the Group Operating
salaries and benefits, approval of Annual Executive, the Group Management
Incentive targets and Long Term Incentive Committee and senior business and
Plan share awards and review of Non- functional leaders, to create alignment
Executive Directors fees. and drive delivery of Glanbias business
plan and strategy.
See page 70

58 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
GRoup management committee

Detailed Business Review


The Group Management Committee comprises of the Executive
Directors and Group Secretary whose details are given on
page 53 plus the senior executives below:

Governance
Jim Bergin Colm Eustace Colin Gordon Raimund C. Hoenes
CEO Glanbia Ingredients CEO Agribusiness CEO Consumer Products CEO Customised Solutions
Ireland Limited

Financial Statements
Colm Eustace (B.Ag. Sc., C. Colin Gordon (BBS, MBS, FMII) Raimund Hoenes (Ph.D.,
Jim Bergin (B.Comm., M.Sc. Dip. AF., MBA) (aged 52) is (aged 52) is Chief Executive of M.Sc.) (aged 47) is Chief
Management Practice) (aged Chief Executive of Agribusiness Consumer Products since his Executive of Customised
51) is Chief Executive of since 2006. He joined the appointment to the Group in Solutions. He joined the Group
Glanbia Ingredients Ireland Group in 1985 and has held 2006. He previously worked in 2008 and was appointed
Limited, a significant associate a number of senior positions with C&C Group plc where he Chief Executive of Customised
of the Group. He was since 1997 within Agribusiness. held a number of senior Solutions in 2009. He
appointed to this role in 2012 He is a Director of Co- positions, including Managing previously worked in a
(having previously been CEO of operative Animal Health Director of C&C (Ireland) variety of senior roles in the
Dairy Ingredients Ireland). He Limited. Limited. Colin is currently a ingredients sector in several
worked for Glanbia between member of the Consumer countries.
1984 and 2012 and has held a Foods Board of Bord Bia and
number of senior positions a Director of the Marketing
during that time. Institute of Ireland.

Jerry ODea Tom Tench Paul Vernon Jeff Williams


CEO and President Ingredient Group Corporate CEO Glanbia Cheese Limited CEO and President US Cheese
Technologies Development Director
Paul Vernon (aged 52) was Jeff Williams (B.A., MBA)
Jerry ODea (B.Sc. Dy., MBA) Tom Tench (aged 43) was appointed to the Group (aged 57) is President and
(age 54) is President and appointed Group Corporate Management Committee in Chief Executive of US Cheese
Chief Executive of Glanbia Development Director in 2013. December 2013 having been and has management
Nutritionals Ingredient Tom joined the Group in 2004 Chief Executive of the Glanbia responsibilities for the Groups
Technologies. He joined the with responsibility for strategy Cheese Joint Venture since Joint Venture, Southwest
Group in 1981 and has held and development for Glanbias its inception in 2000. Prior Cheese. He joined the Group
a number of senior positions US Cheese and Global to joining the Group in 1995 in 1989 and has held many
including General Manager of Nutritionals businesses. Prior he worked for a dairy positions in the US Cheese
Glanbia Ingredients USA to joining Glanbia, Tom worked co-operative based in Northern business including Chief
and President of Glanbia in the investment banking and Ireland and began his career Operations Officer and
Nutritionals. He was appointed investment management with a leading FMCG company Executive Vice President.
Chief Executive of Glanbia industries. Tom also served for based in Great Britain. Jeff was appointed President
Nutritionals Ingredient 10 years as an officer in the and Chief Executive of US
Technologies in 2008. US military. Cheese in 2005. He previously
worked for six years in the
banking industry.

www.glanbia.com 59
Governance

AUDIT COMMITTEE REPORT

Dear Shareholder, The Committee has performed a detailed


I am pleased to present the Audit review of both the financial and non-
Committee report for 2013. financial information contained in the
Groups Annual Report and is satisfied that
During the year, the Audit Committee the report presents a fair, balanced and
devoted significant time to fulfilling its key understandable assessment of the
oversight responsibilities: reviewing the Groups position and prospects and
design and implementation of the Groups provides the information necessary to
systems of risk management and internal assess the Groups business model,
control; monitoring the integrity of the strategy and performance. The Committee
Groups financial reporting; and assessing is very aware of the evolving regulatory
John Callaghan, Audit Committee Chairman the effectiveness of both the internal and environment and in particular the
external audit processes. This involved proposed EU audit sector reforms.
engaging regularly with management,
The Audit Committee Internal Audit and the external Auditors While the Committee is satisfied
that the current external Auditors,
believes that a robust control to ensure the information the Committee
PricewaterhouseCoopers are both
receives is timely and accurate enabling
environment and effective risk the Committee to discharge its independent and objective, it is conscious
management is fundamental duties effectively. that the level of non-audit fees has grown
in recent years primarily as a result of due
to creating and preserving diligence work for potential acquisitions
As a Committee, we are determined to
shareholder value. ensure that management has fully and tax advisory fees. To further
considered the risks their business areas strengthen auditor independence
face, how these risks are being managed safeguards, the Committee has taken
and that residual risk exposures do not measures to reduce the level of non-audit
exceed the Boards risk appetite or related services going forward and
tolerance levels. In order to obtain a effective from 2014 has substantially
deeper insight into the risks and reduced the provision of any new
challenges within the respective business due diligence services by
areas and to provide the appropriate PricewaterhouseCoopers. The Committee
constructive challenge to management, will keep the timing of a formal audit
the Committee has continued its tender under review in 2014 as we await
programme of receiving presentations clarification of EU legislation.
directly from Business Unit senior
management and Group function leads, On behalf of the Audit Committee
facilitating real engagement with operating
management at all levels.

John Callaghan
Audit Committee Chairman

Role of the Audit Committee

Key roles and responsibilities of the Internal Audit: their independence and expertise,
Audit Committee include: Reviewing the Internal Audit plan, the terms of reference of their
the reports issued by Internal Audit engagement, audit and non-audit
Financial reporting: and the effectiveness of the Internal fees, and assessing the effectiveness
Monitoring the integrity of the Annual Audit function; of the external audit process;
Report and half-year results, including Agreeing the scope of the external
a review of the accounting policies Whistleblowing and fraud:
Auditors audit plan, including
and significant financial reporting Reviewing the arrangements for
materiality considerations;
judgements which they contain; employees to raise concerns, the
procedures for fraud prevention Reviewing the final report of the
Risk management and internal and detection and ensuring that they external Auditors in respect of the key
control systems: allow for investigation and appropriate audit findings and internal control
Reviewing the design and follow up; observations; and
implementation of the Groups systems Considering and making
of risk management and internal External Audit: recommendations to the Board on the
control; Establishing and overseeing the appointment of the external Auditors.
Groups relationship with the external
Auditors, including the monitoring of

60 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Governance Key matters considered by the Membership
The Audit Committee was in place Committee in 2013
throughout 2013. At our meetings during 2013 and to date
in 2014, the Committee considered,
The Committee comprises eight Non- amongst other matters, the following:
Executive Directors, of whom three

Detailed Business Review


members constitute a quorum. Each of Financial reporting
these Directors is considered by the Board Reviewed the Groups half-year results
to be independent in judgement and and 2013 Annual Report including;
character (see page 69 of the Nomination considering and challenging (where
Committee report). John Callaghan, the appropriate) the Groups accounting
Senior Independent Director, has been policies, key judgement areas,
Chairman of the Committee since 1998. exceptional items, tax and pension
The Group Secretary acts as secretary disclosures;
to the Committee. Membership of the Considered any potential indicators of Committee Chairman and
Committee is reviewed annually by the impairment to goodwill and other Senior Independent Director
Chairman of the Committee and the intangible assets and the appropriateness Non-Executive Directors

Governance
Group Chairman who recommend new of the going concern basis in preparing Non-Executive Directors nominated
appointments to the Nomination the 2013 Financial Statements; by Glanbia Co-operative Society
Committee for onward recommendation Limited
Reviewed reports from management
to the Board.
and the external Auditors on
The terms of reference of the Audit accounting, financial reporting,
Committee can be found on the Groups treasury and taxation issues;
website: www.glanbia.com or can be Received a report on, and performed an Allocation of time

Financial Statements
obtained from the Group Secretary. assessment of the effectiveness of the
Set out opposite is an analysis of the Groups financial reporting controls and
Committees current membership and systems of risk management and
primary activities during 2013. internal control;
Considered the Directors Responsibility
2013 Committee meeting attendance
Statement and the principal risks and
There were four scheduled meetings of
uncertainties of the Group within
the Audit Committee during the year
the 2013 Annual Report and the
ended 4 January 2014. Attendance by the
half-year results;
Non-Executive Directors at these meetings
is outlined in the table below. Meetings are Considered the 2012 UK Corporate
typically attended by the Group Managing Governance Code and other regulatory
Director, the Group Finance Director, the updates; and
Financial reporting and
Group Financial Controller, the Group Recommended the approval of the
corporate governance updates
Head of Internal Audit and the external Groups half-year results and 2013
Auditors. Other relevant people from the Annual Report to the Board. External Auditors
Groups businesses are requested to Risk management and internal
attend certain meetings in order to provide control systems
a deeper insight into key developments Internal Audit
and areas of particular risk focus. Other

2013 Audit Committee meeting attendance


Number of full years 2013 meeting
Member Appointed on the Committee attendance
J Callaghan (FCA, FIB) 13 Jan 1998 16 4/4
L Herlihy 8 June 2001 12 4/4
Mn Keane 29 June 2010 3 4/4
H Corbally 7 July 2005 8 4/4
P Gleeson 26 July 2011 2 3/4
P Haran (B.Sc., M.Sc.) 9 June 2005 8 4/4
J Liston (B.A., MBA) 10 June 2002 11 4/4
M Merrick 26 July 2011 2 4/4

For more information on members see pages 52, 54 and 55

www.glanbia.com 61
Governance

AUDIT COMMITTEE REPORt

Risk management and internal Whistleblowing and fraud Review of Audit Committee performance
control systems Considered the Groups arrangements Considered the Committees
Received Group key risk summary for its employees to raise concerns, in performance which was deemed
presentations tracking residual risk confidence, about possible wrong doings effective, Committee members
exposures and assessed management in financial reporting and other matters; independence and recent and relevant
action plans to ensure the Boards risk Considered the Groups procedures for financial expertise, all of which were
appetite and tolerance levels were fraud prevention and detection to deemed appropriate;
not exceeded; ensure that these arrangements allow The Board agreed to the Committees
Considered the current risk for the proportionate and independent recommendations to adjust its terms of
management process and deemed investigation of such matters and reference to reflect the evolving
it effective in relation to identifying, appropriate follow up action; and regulatory framework and corporate
assessing and monitoring Group risks; Deemed the current procedures were governance code updates.
Received a presentation from the Group adequate but would be examined
2013 Significant financial reporting
food safety leads outlining Group further in 2014.
judgements and disclosures
reporting lines, the operation, results
External Auditors The Audit Committee reviewed the
and actions arising from the bi-annual
Held a private review meeting with effectiveness of the process undertaken
Glanbia Quality System review and plans
the audit partner; by the Directors to evaluate going
to enhance risk management tools;
concern, including the analysis supporting
Received a presentation on the Glanbia Reviewed the report from the Auditors the going concern statement and
Risk Management System, an regarding their findings in respect of disclosures in the Financial Statements.
independent measurement of Group- the half-year review and the 2013 audit The Committee was satisfied that a robust
wide operational and risk management and a summary of internal control assessment had been made, further detail
procedures; observations, including observations in respect of which is given within the
in respect of IT controls; Statement of Compliance with the UK
Received a presentation from the Group
Head of IT and Business Services which Assessed the effectiveness of the Corporate Governance Code (2012) and
considered IT risks and controls, recent Auditors, reviewed the proposed the Irish Corporate Governance Annex
IT developments and progress against audit fee, the level of non-audit on page 93.
the IT rollout plan; and services provided and the Auditors
independence; The Audit Committee assessed whether
Reviewed the strategy to drive benefits
Considered the appropriateness suitable accounting policies have been
from the Global Business Services
of the re-appointment of the Auditors adopted and whether management has
delivery model.
to the Board; made appropriate estimates and
Internal Audit judgements in the preparation of the 2013
This consideration included a review of Annual Report. As part of this exercise the
Held a private review meeting with the external audit tendering requirements
Head of Internal Audit; Committee reviewed accounting papers
and the approval of the rotation of prepared by management which provide
Received a presentation covering team audit partner on the completion of the the supporting detail for the key areas of
development, progress against the audit five year term to ensure independence financial judgement.
plan, improvements implemented to is maintained in line with the Accounting
address control weaknesses identified, Practices Board (APB) Ethical The primary areas of financial reporting
risk management practices and Standards; and judgement and disclosure which were
whistleblowing procedures; Considered the external audit plan and considered by the Committee in relation
Considered and approved the Internal review of corporate reporting updates. to the 2013 Financial Statements and how
Audit workplan; and these were addressed are outlined on the
Considered the effectiveness of the following page:
Internal Audit function, adequacy of
resources, experience and expertise
and deemed all to be satisfactory.

62 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
2013 Significant financial reporting judgements and disclosures

How the Audit Committee addressed these matters

Impairment review of The Committee recognises that goodwill and intangible asset impairment reviews involve
goodwill and intangibles a range of judgemental decisions largely related to the assumptions used to assess the value in

Detailed Business Review


use of the assets being tested. These assumptions typically include long term business and macro
economic projections, cashflow forecasts and associated discount rates;
Detailed reports to support the recoverable value of the balances included in note 15
to the Financial Statements were received from management and considered by the Committee.
This included examining the methodology applied including ensuring the discount rates used are
within an acceptable range;
The Committee constructively challenged assumptions used to support short and long term
projections, including consideration of different scenarios and key assumptions used within the
respective reviews;
The Committee considered input received from both the Internal and external Auditors; and

Governance
Following these discussions, the Committee is satisfied that the impairment review approach, key
assumptions and conclusions are appropriate and the disclosures in respect of the impairment
reviews as set out in note 15 to the Financial Statements are accurately stated.

Pension disclosures and The Group operates a number of post employment defined benefit retirement schemes.The
key assumptions pension costs and liability calculations in respect of the defined benefit retirement schemes are
calculated and determined by independent actuaries;
The Committee recognises the inherent uncertainties surrounding the financial assumptions

Financial Statements
adopted in defined benefit retirement scheme valuations, particularly in relation to discount rate,
price inflation and mortality assumptions;
The Committee assessed the estimated impacts on plan valuations resulting from changes to the
key actuarial assumptions;
The Committee discussed the appropriateness of the assumptions used with the external Auditors,
who had indicated in their audit plan that this was an elevated audit risk area;
The Committee also reviewed the gain arising during the year from revisions to the Groups pension
arrangements for two smaller Irish defined benefit schemes to ensure that both were correctly
recognised in the Financial Statements; and
Following discussion with management and the external Auditors, the Committee is satisfied that the
accounting and disclosures in respect of the defined benefit retirement schemes are appropriate.
Further details on the pension schemes are given in note 28 to the Financial Statements.

Tax provisions The Committee review focused on the key judgements in relation to the calculation
of the year end tax provisions and the respective tax charge;
The Committee received an analysis of movements in the tax provisions over the financial
year and sought an update from management on the outcome of any tax authority reviews
conducted during the financial period;
The Committee discussed the key assumptions underlying the provisions and reviewed external
professional advice obtained to support the year end provisions;
The Committee discussed the basis of and appropriateness of the provisions with the external Auditors;
and
Following these enquiries, the Committee is satisfied that the key assumptions governing the
calculation of tax provisions within the Financial Statements are appropriate.

www.glanbia.com 63
Governance

AUDIT COMMITTEE REPORT

External Auditors review As part of the independence review The primary non-audit related services
During the year, the Committee agreed the process, the external Auditors are provided by PricewaterhouseCoopers
approach and scope of the annual audit requested to formally confirm their during the year were in respect of due
work to be undertaken by the external independence in writing to the Committee. diligence work for potential acquisitions
Auditors, which included planned levels of This confirmation process also provides and broader Group tax consulting advice.
materiality, key risks to the accounts examples of safeguards that may, either PricewaterhouseCoopers were considered
including fraud risks, confirmation of individually or in combination, reduce any to be best placed to provide these
auditors independence, the proposed independence threat to an acceptable services and the Committee reviewed
audit fee, the Groups processes for level. While their appropriateness depends the steps to ensure that these non-audit
disclosing information to the Auditors and on the specific circumstances involved services would not impair their
the approval of the terms of engagement in the provision of the service they will independence.
for the audit. The Committee also always include: The Committee is conscious that the
discussed the recent corporate ensuring that the external Auditors ratio of non-audit fees to audit fees is high,
governance updates and the amendments do not make any management and in order to prevent any perceived or
required to the format of the Independent decisions; and actual impact to the external Auditors
Auditors report. The Committee ensured independence, we have implemented
ensuring the individuals involved in
that the external Auditors had direct further restrictions on the type of services
providing the non-audit service are not
access to the Chairman of the Committee that may be provided by the external
members of the audit engagement team.
and the Group Chairman. It is standard Auditors in the future. These restrictions
practice for the external Auditors to meet Non-audit services include substantially eliminating any further
privately with the Audit Committee on at The Committee performs an annual involvement in due diligence projects that
least an annual basis without any review of the schedule of non-audit commenced post January 2014 and
members of management or the Executive services authorised and the level reducing the threshold for approving
Directors being present. This was held of fees paid. Fees paid to non-audit services in advance by the
following the 2012 audit process and PricewaterhouseCoopers for audit Chairman of the Committee from
again in March 2014 following the related and non-audit related services 100,000 to 50,000. The Committee has
completion of the 2013 audit. are analysed in note 6 to the Financial also requested the Group Finance Director
Statements and a trend analysis is to present an analysis of audit and other
Independence of our external Auditors assurance services versus non-audit
provided in the table below.
In order to ensure the independence and services and a schedule of accompanying
objectivity of the external Auditors, the non-audit fees for its review on a
Committee maintains and regularly quarterly rather than annual basis
reviews the Groups Auditors Relationship PERCENTAGE OF STATUTORY AUDIT
AND OTHER ASSURANCE SERVICES from 2014 onwards.
and Independence Policy. This policy
provides clear definitions of services that VERSUS TAX ADVISORY AND OTHER
Audit appointment, tendering and
PricewaterhouseCoopers cannot provide, NON-AUDIT SERvICES
independence
such as financial information systems The Committee considers the
design and implementation, internal audit performance of the external Auditors,
2013 43% 57%
services or legal services. The policy including the rotation of the audit partner,
also recognises that certain work of a each year and also assesses their
non-audit nature may be best 2012 56% 44% independence on an ongoing basis.
undertaken by the external Auditors. In line with the APB Ethical Standards,
PricewaterhouseCoopers may only the external Auditors are required to rotate
provide non-audit services provided that 2011 50% 50%
the audit partner responsible for the Group
any individual service to be undertaken by audit every five years. The current audit
the external Auditors, to a value in excess 0% 50% 100% engagement partner was appointed as
of the established threshold, does not lead engagement partner for the Group in
impair their independence and is Statutory audit and other assurance services
2013 following the rotation of the previous
approved in advance by the Chairman Tax advisory and other non-audit services partner on the completion of her five year
of the Committee. term. The Committee believes that rotation

ensures a fresh review without sacrificing
industry knowledge.

64 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
PricewaterhouseCoopers have been the Receiving details of any relationships Based on the Committees ongoing
Groups Auditors since the merger of between the Group and assessment of the external Auditors
Avonmore Foods plc and Waterford Foods PricewaterhouseCoopers that may performance and the quality of the audit
plc in September 1997 (16 years). Section have a bearing on their independence partners interaction with the Committee,
160(2) of the Companies Act, 1963 and receiving written confirmation from the Committee remains satisfied with the
provides that the auditor of an Irish the external Auditors that they are effectiveness and efficiency of the audit

Detailed Business Review


company shall be automatically re- independent of the Group; process and the independence of the
appointed at a companys annual general Monitoring the independence of the external Auditors. The Committee has
meeting unless the auditor has given audit team versus best practice and therefore not considered it necessary to
notice in writing of his unwillingness to regulatory guidelines; require the audit to be put out to tender in
be re-appointed or a resolution has been respect of the year to 4 January 2014 but
Reviewing the quality and scope of the will keep this position under review in line
passed at that meeting appointing
audit planning process, in particular how with its responsibilities under the terms of
someone else or providing expressly
responsive the external Auditors have reference, the audit tendering provisions in
that the incumbent auditor shall not be
been to changes in our business; the Code, FRC guidance, Competition
re-appointed. In this respect, Irish
company law differs from the requirements Reviewing the significant audit risks and Commission findings and proposed EU
that apply in other jurisdictions, for elevated audit risks identified in the audit reforms. There are no contractual or

Governance
example the UK, where auditors of a planning process and the Auditors similar obligations restricting the Groups
public company must be re-appointed proposal to audit these risks; choice of auditors. The Committee is very
annually by shareholders at the The level of understanding demonstrated supportive of the recent and proposed
annual general meeting. The Auditors, of the Groups business and industry; amendments which will be considered
PricewaterhouseCoopers, have indicated further in 2014. The Committee considers
The quality of reports, including the
that they are willing to continue in office. it essential that a major international
content of the management letter,
Accordingly, the Directors have not Group, such as Glanbia, ensures that the
provided to the Audit Committee
proposed a resolution to re-appoint tendering of the external audit is well

Financial Statements
and the Board;
PricewaterhouseCoopers as such a planned to enable the Group to comply
resolution can have no effect in Ireland. The level of challenge provided by the with regulatory and best practice
external Auditors to management on requirements as well as ensuring an
The Committee has noted the audit judgemental areas such as impairment effective and efficient ongoing external
tendering recommendations contained assessments or tax and legal provisions; audit service.
in the 2012 edition of the UK Corporate and
Governance Code, the recent findings Performing a review of the audit fee
of the Competition Commission, the based on value received and versus
Guidance for Audit Committees issued peer companies.
by the Financial Reporting Council (FRC)
and the EU Audit Reform Framework
proposals; particularly in the context of
potential mandatory rotation of audit firms
and the prohibition or cap of non-audit
services. While the Group has not formally
tendered the audit since the merger date,
the Committee performs an annual review
of the effectiveness of the external audit
process by using a number of measures,
including, but not limited to:

www.glanbia.com 65
Governance

NOMINATION COMMITTEE REPORT

Dear Shareholder, The Nomination Committee continues to


I am pleased to present the Nomination work with the Board to enhance corporate
Committee report for 2013. governance processes. During the year
we commissioned an independently
2013 was another year of change for the facilitated Board evaluation conducted by
Board. Siobhn Talbot succeeded John Karl Croke of Board Works, who has no
Moloney as Group Managing Director other connection to Glanbia. Board Works
having been appointed as Group is a leading Board advisory company that
Managing Director Designate in June acts for many of the largest organisations
2013. John retired from the Board in in Ireland, the UK and the USA. Clients
November 2013. We appointed three new include public and private companies,
Liam Herlihy, Group Chairman and Executive Directors, Brian Phelan, Hugh multinationals, private, professional
Nomination Committee Chairman McGuire and Mark Garvey, and two new services and state companies.
Non-Executive Directors, Donard Gaynor The outcome of the evaluation and
and Vincent Gorman. Biographies of all recommendations are set out on page 50.
We have secured important members of the Board can be found on
Non-executive succession, recognising
appointments and changes to pages 52 to 55.
the ability of Glanbia Co-operative Society
the composition of the Board Reflecting the new reporting structure for Limited to nominate up to 14 of our 18
during 2013. We will continue the Group, we announced new Non-Executive Directors, remains a key
focus for the Committee for 2014. A
to ensure the Board has the organisational changes, effective 1 June
detailed process, which will be
2013. Hugh McGuire, Chief Executive
right skills and experience to Officer of Global Performance Nutrition independently supported, is currently
meet the challenges and was appointed as an Executive Director underway to ensure the Board has the
opportunities to the Group. and Brian Phelan (an existing Executive appropriate skills and experience to manage
Director since 1 January 2013) was the challenges to the Group. This will be in
appointed as Chief Executive Officer of line with our new policy on Independent
Global Ingredients, thereby enhancing the Non-Executive Directors approved in 2014
alignment of the Board with our business and explained on page 68.
priorities.
Further details about the role of the
We saw the retirement of Billy Murphy, Nomination Committee may be found in
Brendan Hayes and Robert Prendergast the following pages. I am available at any
as Non-Executive Directors. Additionally, time to discuss with shareholders any
Jerry Liston has indicated he will not seek concerns which they wish to raise.
re-election at the forthcoming Annual
General Meeting (AGM). Donard Gaynor On behalf of the Nomination Committee
will take over as Chairman of the
Remuneration Committee following
Jerrys retirement.
Liam Herlihy
Nomination Committee Chairman
Our highlights

Following the retirement of consumer goods (FMCG) Considered the nomination by Glanbia
John Moloney from the Board, experience, culminating in the Co-operative Society Limited (the
we recommended the appointment appointment of Donard Gaynor as Society) of Vincent Gorman as
of Siobhn Talbot as Group a Non-Executive Director; Non-Executive Director; and
Managing Director; Considered and approved After the year-end, considered the
Considered the implications of recommendations regarding the outcome of the externally facilitated
Siobhn Talbots appointment as Groups organisational structure, Board evaluation when discussing the
Group Managing Director and culminating in the appointment of effectiveness of the Non-Executive
implemented a search to identify a Hugh McGuire, Chief Executive Officer Directors seeking re-election at the
successor for her as Group Finance of Global Performance Nutrition as an 2014 AGM.
Director, resulting in the appointment Executive Director and the
of Mark Garvey; appointment of Brian Phelan (an
Considered the composition Executive Director since 1 January
and balance of the Board and the 2013) as Chief Executive Officer of
requirement for an independent Global Ingredients;
candidate with appropriate
international and fast moving

66 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Governance Appointment of new Membership

Detailed Business Review


The Committee was in place throughout Group Managing Director
2013. Liam Herlihy, the Group Chairman, The Committee led the process for the
has been Chairman of the Committee appointment of Siobhn Talbot as the new
since 2008. Group Managing Director following the
notification to the Board by John Moloney
The Committee comprises four Non- that he wished to retire as Group
Executive Directors, of whom two Managing Director. Strong succession
members constitute a quorum. The Group planning processes within the Group had
Secretary acts as secretary to the identified Siobhn as an appropriate
Committee. When dealing with any candidate. Over the last number of years,
matters concerning his membership of the the Group has given increased focus to
Board, the Group Chairman will absent leadership development through robust

Governance
himself from meetings of the Committee succession planning and has strengthened
as required and such meetings will our performance management culture. Group Chairman
accordingly be chaired by the Senior Our systems are designed to ensure key Non-Executive Directors
Independent Director, John Callaghan. talent is identified and developed and that
the right organisational capability exists to
Key responsibilities deliver on both the Business Unit strategic
Making recommendations to the Board imperatives and the Groups overall
on the appointment and re-appointment

Financial Statements
strategy. Allocation of time
of Directors;
Planning for the orderly succession of The Committee was satisfied that Siobhn
new Directors to the Board; was the person most appropriate to fill the
role of Group Managing Director having
Keeping under review the leadership
regard to the depth of knowledge and
needs of the Group both executive and
experience she possesses of the Group
non-executive, with a view to ensuring
and our industry in general. Siobhn was
the continued ability of the Group to
appointed Group Finance Director and to
compete effectively in the market place;
the Board of Glanbia in 2009. She brings a
Recommending to the Board the wide range of operational, financial and
membership and chairmanship of the strategy experience to her new role.
Audit and Remuneration Committees Siobhn joined the Group in 1992,
respectively; and became a member of the Group Operating
Board and Committee composition
Keeping the extent of Directors other Executive in 2000, was appointed Deputy
interests under review to ensure that the Finance Director in 2005 and her role Succession planning
effectiveness of the Board is not encompassed responsibility for Group Board effectiveness
compromised. strategic planning until the end of 2012. Other
The appointment of Siobhn as Group
The full terms of reference of the Managing Director was recommended to
Nomination Committee can be found on the Board on 21 May 2013 and she was
the Groups website: www.glanbia.com appointed as Group Managing Director
or can be obtained from the Group Designate on that date, effective 1 June
Secretary. 2013 and Group Managing Director on 12
November 2013.
Activities during 2013
The principal activities undertaken by the The Committee did not use an external
Committee in 2013 are as follows. search consultancy or open advertising
for the appointment of Siobhn as
it was not deemed necessary.

2013 Nomination Committee meeting attendance


Number of full years 2013 meeting
Member Appointed on the Committee attendance
L Herlihy 5 June 2008 5 5/5
J Callaghan 8 June 2001 12 5/5
P Haran 9 June 2005 8 5/5
J Liston 10 June 2002 11 5/5

For more information on members see pages 52 and 54

www.glanbia.com 67
Governance

NOMINATION COMMITTEE REPORT

Appointment of new these Executives as part of the Board of Policy for appointment of new
Group Finance Director Directors. The appointments of Hugh independent Non-Executive Directors
Following the appointment of Siobhn McGuire, Chief Executive Officer of Global The Board is conscious of the importance
Talbot as Group Managing Director Performance Nutrition as an Executive of planned succession of independent
Designate, a process was initiated to Director and Brian Phelan, an existing Non-Executive Directors. The Company
appoint a new Group Finance Director. Executive Director (since 1 January 2013) has adopted a formal policy with respect
We worked with external consultants, as Chief Executive Officer of Global to the appointment of new independent
Amrop Strategis, defining our requirements Ingredients into new organisational roles Non-Executive Directors (other than those
and reviewing prospective internal and reflects the fact that today Glanbia has two appointed by Glanbia Co-operative
external candidates. Amrop Strategis does well established growth platforms that Society Limited). Our policy is that any
not have any connection with the Group. cover both business-to-consumer and new independent Non-Executive Directors
We managed a thorough orderly search business-to-business nutritional products will be appointed for an initial three year
(which included the preparation of a and solutions. term, subject to re-appointment by
description of the role and capabilities shareholders at each Annual General
required and preparation of a short-list Hugh McGuire joined the Group in 2003 Meeting and should expect to serve no
of candidates) and a detailed interview and has been Chief Executive Officer of more than three successive three year
and evaluation process. The appointment Performance Nutrition since 2008. Brian terms i.e. a maximum of nine years.
of Mark Garvey was recommended to, Phelan, who was appointed to the Board All new independent Non-Executive
and approved by, the Board on 12 on 1 January 2013, was previously Group Directors and any re-appointment will be
November 2013. Development & Global Cheese Director subject to a rigorous review by the
and joined the Group in 1993. Nomination Committee after the initial
Mark joined Glanbia from Sara Lee three year period and annually after six
Corporation where he was Executive Vice The Committee did not use an external years. The Board is engaged in an orderly
President and Chief Financial Officer until search consultancy or open advertising for programme of retirement and appointment
2012. Sara Lee, a leading global food and the appointment of Brian or Hugh as it to bring the composition of new
beverage company with operations in over was not deemed necessary. independent Non-Executive Directors
40 countries, was reorganised in 2012 as in line with this policy.
two separate listed companies - DE Appointment of new Non-Executive
Master Blenders and Hillshire Brands - a Directors of the Company Regular matters
decision which Mark facilitated and During 2012, the Committee considered A number of regular matters were
executed with the Sara Lee Board. Since the composition of the Board and considered by the Committee in
1995, Mark held a number of senior concluded that it was an appropriate time accordance with its terms of reference,
finance roles in the Sara Lee organisation to appoint a Non-Executive Director with details of which are set out below:
in the USA and Europe including Chief international experience and steps were
Financial Officer (CFO) of Sara Lee North initiated in a search for an appropriate Re-election of Directors
America with revenue of $6 billion and candidate. This involved interviews/ The Committee continued to be of the
Group CFO of Sara Lee International with meetings with members of the Committee view that, in line with best practice, all
revenue of $8 billion. Prior to Sara Lee, and a comprehensive review exercise Directors should be re-elected to the
Mark worked with Arthur Andersen in including satisfying itself as to the Board at the Companys AGM. However,
Ireland and the USA as a Manager in candidates independence. A having regard to notice to the Company
various audit and advisory roles. Mark recommendation was made to the Board from the Society that Brendan Hayes and
brings a wealth of international, industry, of Directors on 12 March 2013 and the Robert Prendergast would cease to be
regulatory and finance experience to his Board approved the appointment of Directors of the Society from its first
new role in Glanbia. Donard Gaynor as a Non-Executive Directors meeting following its 2013 AGM,
Director, effective 12 March 2013. it recommended to the Board, in these
New organisational changes effective circumstances, that Brendan Hayes and
1 June 2013 and appointment of new During 2013, the Committee recommended Robert Prendergast should not be put
Executive Directors the appointment of a new Non-Executive forward for re-election at the 2013 AGM
Prior to the announcement by the Board of Director, Vincent Gorman to the Board. and all remaining Directors of the Board
the new organisational changes in May The Committee noted his nomination be put forward for re-election by the
2013 effective 1 June 2013, the Committee by the Society and the experience shareholders of the Company at the
carefully considered the qualifications and suitability of Vincent and 2013 AGM.
required to lead the two key growth recommended his appointment to
platforms of the Group and the implications the Board of the Company. This was All of the Non-Executive Directors are
for the composition of the Board of subsequently approved by the Board seeking re-election at the 2014 AGM,
Directors. The Committee recommended on 27 June 2013. with the exception of Jerry Liston who
that the new organisational roles be has indicated his intention to retire at the
The Committee did not use an external commencement of the AGM. The
represented on the Board of Directors
search consultancy or open advertising for Committee is satisfied that the
thereby getting their input into decision
the appointment of Donard or Vincent as it backgrounds, skills, experience and
making and gaining the additional Board
was not deemed necessary. knowledge of the Company and the Group
level visibility which comes from having
of the continuing Directors collectively
enables the Board and its Committees to

68 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Glanbia Co-operative Society Limited Right to nominate 14 of the companys Directors

Detailed Business Review


The Society currently owns 41.3% of for 2018 and subsequent years In addition, if the number of Non-Society
the issued share capital of the the number of Society Nominee Nominees on the Board changes, the
Company. During 2012, the Society Directors on the Board will reduce to number of Society Nominees on the
and the Board agreed the following eight members; Board set out opposite will change on a
changes, which will impact the the Group Chairman of the Company pro rata basis. Further if the Societys
composition and size of the Board in will be a Society Nominee until shareholding in the Company falls below
the coming years: 2020; and 40% of the issued share capital,
discussions will take place regarding a
for the years 2014 to 2015 up to eight of the Directors on the Board
further reduction in the size of the
(inclusive) the number of will be composed of Executive Directors
Societys representation on the Board.
and Non-Executive Directors who are

Governance
Society Nominee Directors on
the Board will continue to be up independent of the Society.
to 14 members;
for 2016 and 2017, the number of
Society Nominee Directors on the
Board will reduce to 10 members;

Financial Statements
discharge their respective duties and Non-Executive Directors demonstrated the Co-operative Limited, and farms
responsibilities effectively. This was essential characteristics of independence at Headborough, Knockanore, Tallow,
supported by the formal performance and brought independent challenge and Co. Waterford, but the Committee and
evaluation of the Board conducted by deliberations to the Board through their the Board consider that this does not
Karl Croke of Board Works, the outcome character, objectivity and integrity. This interfere with the discharge of his duties
and recommendations of which are set conclusion was presented to and agreed to the Group.
out on page 50. with the Board.
Review of Nomination
We believe that sufficient biographical The Committee acknowledged that: Committee performance
and other information on those Directors John Callaghan had served on the The Board and Committee assessed its
seeking re-election is provided in this Board for 16 full years; performance, covering terms of reference,
Annual Report and Financial Statements composition, procedures, contribution
Jerry Liston had served on the Board for and effectiveness. As a result of that
to enable shareholders to make an
11 full years; and assessment, the Committee is satisfied
informed decision.
13 of the Non-Executive Directors are that it is functioning effectively and that it
Review of Non-Executive Directors nominated by the Board of the Society, has met its terms of reference.
independence in accordance with for appointment to the Board of the
the guidance in the UK Corporate Company, of whom Liam Herlihy, Diversity
Governance Code (2012) and the Henry Corbally and Eamon Power The Committee at the current time has not
ISE Annex (the Codes). had each served as a Director for nine agreed to set a specific female Board
The Committee reviewed the years or more. member quota. Appointments to the
independence of Non-Executive Directors Board, having regard to the right of the
in accordance with the guidance in the Review of the time required Society to nominate up to 14 of the 22
Codes. The guidance in the Codes from a Non-Executive Director Directors, and throughout the Group will
suggests that a number of factors could The Committee assessed the time continue to be based on the diversity of
be relevant to the determination of a dedicated to the Company and the Group contribution and required competencies,
Non-Executive Directors independence by each Non-Executive Director. This irrespective of gender, age, nationality or
including: representing a significant review also considered the extent of the other personal characteristics.
shareholder, former service as an Non-Executive Directors other interests to
executive and extended service to the ensure that the effectiveness of the Board
Board. However, the Codes also make it is not compromised by such interests.
clear that a director may be considered
independent notwithstanding the presence The Board and Committee are satisfied
of one or more of these factors. This that the Group Chairman and each of the
reflects the Boards view that Non-Executive Directors commit sufficient
independence is determined by a time to the fulfilment of their duties as
Directors character and judgement. Group Chairman and Directors of the
The Committee concluded that, Company respectively. The Group
throughout the reporting period, all Chairman is a Director of Irish Dairy Board

www.glanbia.com 69
Governance

REMUNERATION COMMITTEE REPORT

Dear Shareholder, exceeded maximum expected


I am pleased to present the Remuneration performance under the 2008 LTIP (9.84%).
Committee report for 2013. Over the last three years TSR performance
has delivered an increase of 240.58%,
The Group has delivered another strong placing Glanbia in the top quartile of its
performance in 2013 building on the comparator group. As a result share
momentum of recent years, achieving for awards granted to Executive Directors,
the fourth successive year double digit under the 2008 LTIP in 2011, will vest in
increases in adjusted earnings per share full. This is the second consecutive year
on a constant currency basis. for which share awards will vest in full.

Jerry Liston, Remuneration A key link exists between our performance The tables on page 78 set out a summary
Committee Chairman and our Executive Directors variable of remuneration earned by Executive
remuneration which consists of an Annual Directors in respect of performance for
Incentive and a Long Term Incentive Plan. 2013 and those share awards which will
The remuneration strategy vest with Executive Directors in respect
is to ensure management The Annual Incentive is based on a of performance in the three year period to
combination of personal objectives, 4 January 2014.
are competitively rewarded year-on-year growth in annual adjusted
for the consistent generation earnings per share (EPS) on a constant The remuneration policy for 2014 remains
of shareholder value. currency basis, which grew by 11.9% and unchanged from 2013. The salaries for
a closing debt/adjusted EBITDA ratio, the Siobhn Talbot, Brian Phelan and Hugh
closing ratio achieved was 1.7 times. McGuire were reviewed with effect from 1
Additionally, all Executive Directors October 2013 (Siobhn) and 1 June 2013
achieved their personal objectives. As a (Brian and Hugh) to take into account
result, the Executive Directors were changes to their roles during the year.
awarded an Annual Incentive equal to Details of the changes in their roles are set
108% of Base Salary of which 75% will be out in the Nomination Committee report.
paid in cash with the balance of 33% Mark Garveys salary was set on
deferred into shares deliverable in two appointment to the Board.
years, subject to a claw back condition.
Glanbia reviewed its remuneration policy
Share awards under the 2008 Long Term and plans in 2011 and with shareholder
Incentive Plan (2008 LTIP) in respect of approval implemented changes to its long
performance in the three year period to 4 term incentive arrangements in 2012. In
January 2014 are based on growth in line with our existing policy, that review has
annual adjusted EPS on a reported basis established the three year remuneration
and the Groups relative total shareholder policy. We intend to review again our
return (TSR) measured against a peer remuneration policy and practices in 2014
group of 13 other international food and and the policy and any changes will be put
nutritional companies. The performance to shareholders for their support in 2015.
conditions have been independently The 2012 Remuneration report received a
verified by external advisers on behalf of 97% approval of votes cast at the 2013
the Committee. The outcome for annual Annual General Meeting (AGM) (please
adjusted EPS is set out on page 80 and see detailed results on page 82) and I
shows that actual performance (13.36%) thank you for your continued support.

Our highlights

Consideration and approval of the Review of the outcomes for Business Review and approval of all share
remuneration arrangements for Siobhn Unit and personal targets under the awards made under the 2008 LTIP
Talbot following her appointment as Annual Incentive scheme for the Group taking into account the total value of
Group Managing Director; Operating Executive and the Business share awards under the 2008 LTIP;
Consideration and approval of the Unit CEOs for 2012 and approval of Review and approval of all Executive
remuneration arrangements for Hugh the payment of such Annual Incentives Directors Annual Incentive objectives
McGuire and Brian Phelan and other including the level of deferral; for 2014;
senior managers following the Review and approval of General Review of Executive Director
restructuring of the Group; Investment Measures (GIM) for share shareholding guidelines and
Consideration and approval of the awards granted in 2013 under the achievement of these for each
remuneration arrangements for Mark 2008 LTIP; Executive Director; and
Garvey on his appointment as Group Review and approval of the vesting Review of the UK disclosure
Finance Director; level for share awards granted in 2010 requirements and the Companys
under the 2008 LTIP including voluntary implementation of many of
performance testing; the requirements in these regulations.

70 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Glanbia is mindful that it is an Irish Key responsibilities Membership
incorporated company with a dual listing, Determine and agree with the Board
with a primary listing on the Irish Stock the framework or broad policy for
Exchange and a secondary listing on the remuneration of the Non-Executive
London Stock Exchange. Our approach is Directors, the Executive Directors and
other senior executives as required;

Detailed Business Review


that the remuneration report should
reference best disclosure practice in both Determine, within the agreed policy,
Ireland and the UK. 2013 saw the individual total compensation packages
publication of wide reaching proposals on for the Non-Executive Directors, the
the subject of remuneration in the UK by Executive Directors and other senior
the Department for Business, Innovation executives as required;
and Skills (the UK disclosure
Recommend to the Board any
requirements). As an Irish company,
employee share-based incentive
Glanbia plc is not subject to the UK
schemes and any performance Non-Executive Chairman
disclosure requirements. This report
conditions to be used for such
however voluntarily includes many of these Non-Executive Directors nominated by
schemes; and
new disclosure requirements on directors Glanbia Co-operative Society Limited

Governance
remuneration where it is helpful to support Consider and approve Executive Non-Executive Directors
and explain our approach and policy. The Directors and other senior executives
report is now split into a Policy section, total compensation arrangements
which deals with our remuneration policy annually.
going forward, and an Implementation The full terms of reference of the
section, which deals with payments to Remuneration Committee can be Allocation of time
Directors in the year. found on the Groups website:

Financial Statements
www.glanbia.com or can be
We believe that our current remuneration obtained from the Group Secretary.
structure supports shareholder value
creation, is aligned to our key strategic Governance
imperatives and through this report is The Committee was in place throughout
transparent. This report is designed to be 2013. Jerry Liston has been Chairman of
clear and concise, to meet regulatory the Committee since 2002.
requirements and, above all, to provide
you with information to demonstrate the The Remuneration Committee comprises
alignment of remuneration with the six Non-Executive Directors, of whom
Groups performance. three members constitute a quorum.

More details of the work of the The Group Managing Director and the Framework and policy
Remuneration Committee follows and I Group Human Resources Director attend Total compensation package
hope you find it helpful in understanding Committee meetings by invitation only. Annual incentive
our remuneration policy and payment. They absent themselves when their
Long Term Incentive Plan
remuneration is discussed and no Director
I will retire as a Director at the forthcoming Other
is involved in considering his/her own
AGM and I am pleased to advise that remuneration. The Group Secretary acts
Donard Gaynor will succeed me as as secretary to the Remuneration
Chairman of the Remuneration Committee Committee.
and I would like to wish him and the Group
continued success.
On behalf of the Remuneration Committee

Jerry Liston
Remuneration Committee Chairman

2013 Remuneration Committee meeting attendance


Number of full years 2013 meeting
Member Appointed on the Committee attendance
J Liston 10 June 2002 11 4/4
L Herlihy 8 June 2001 12 4/4
Mn Keane 29 June 2010 3 4/4
H Corbally 26 July 2011 2 4/4
J Callaghan 13 January 1998 16 4/4
P Haran 9 June 2005 8 4/4

For more information on members see pages 52 to 54

www.glanbia.com 71
Governance

REMUNERATION COMMITTEE REPORT

Advice and assistance to the Section A: We seek to:


Remuneration Committee Directors Remuneration create a consistent global approach to
The Remuneration Committee receives Policy Report remuneration by applying our strategy
independent external advice from Towers and policy, as far as possible, to all
Watson, remuneration consultants, in Remuneration strategy and policy
Remuneration policy is based on senior executives;
respect of remuneration policy, pay
attracting, retaining and motivating provide a competitive benefits package;
positioning and best practice. Towers
executives to ensure that they perform in and
Watson is a member of the Remuneration
Consultants Group (RCG) and adheres to the best interests of the Group and its provide an appropriate balance between
the RCG Voluntary Code of Conduct in shareholders by growing and developing fixed and variable remuneration, the
relation to executive remuneration the business. Performance related payment of which is linked to the
consulting (which was originally published elements of remuneration are designed to achievement of demanding Group and
in 2009 and is reviewed biennially). The form an appropriate portion of the overall individual performance measures.
Committee is satisfied that the advice remuneration package of Executive
provided on executive remuneration is Directors. These link remuneration to The Group KPIs, which are detailed on
objective and independent and that no Group performance and individual pages 8 to 9 underpin the selection of
conflict of interest arises as a result of performance, whilst aligning the interests performance criteria used within the
other services. Towers Watson fees for of Executive Directors with those of incentive arrangements.
advising the Committee during the year shareholders.
We have summarized the individual
were 12,185.
This framework is applied, as far as elements of the remuneration packages
Legal advice to the Remuneration possible, to all senior executives to offered to our Executive Directors
Committee is also provided by Arthur Cox, create a consistent global approach to on page 73.
who also provide other legal services to remuneration aimed at driving sustainable
performance by providing a competitive Remuneration policy and design
the Group. The Remuneration Committee
benefits package. 20122014
also receives assistance and advice on
Executive remuneration policy and design
remuneration policy, when required, from
The principles and policy are also applied, is reviewed by the Remuneration
Group Human Resources.
as far as possible, across the Group below Committee on a three year basis and
senior executive level, taking account of accordingly was last reviewed in 2011,
seniority and local market practice. It is our with the advice of Towers Watson,
aim to ensure that our remuneration remuneration consultants, and
arrangements are fully aligned with our implemented with effect from 1 January
approach to risk management. 2012. The Remuneration Committee
continues to consider changes in
Our remuneration strategy and policies regulation and market best practice as
focus on using remuneration to facilitate required. We intend to review again our
the implementation of a successful remuneration policy and practices in 2014
corporate strategy that delivers superior and the policy and any changes will be put
earnings growth and total shareholder to a non-binding shareholder vote in 2015.
returns for our shareholders over the long
term by attracting, retaining and motivating Glanbias incentive plans reference
high quality and committed people who performance measures that reflect the
are critical to sustain the future Groups KPIs and align with our strategy
development of the Group. and intent to build superior financial and
shareholder returns.

72 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Key elements of remuneration for Executive Directors

Element Description Objective Details (including maximum value)


Base Salary Annual fixed pay. Provide competitive base pay which Set by reference to the relevant market
reflects market value of role, job size, median based on an external independent

Detailed Business Review


responsibility and reflects individual skills evaluation of the role against appropriate
and experience. peer companies; and
Reviewed annually by the Remuneration
Committee. Any reviews, unless reflecting a
change in role, usually take effect from 1
January in the relevant year.

Pension Benefit Retirement benefits. Provide competitive, affordable and


sustainable retirement benefits.

Other Benefits Car benefit or equivalent, Provide competitive benefits which


suitable medical recognise market value of role, job size

Governance
insurance, re-location and responsibility.
expenses (if applicable)
and overseas allowance
(if applicable).

Annual Incentive Annual payment only Incentivising Executive Directors to Range of Annual Incentive potential of 0%
earned if agreed target achieve specific performance goals to 150% of Base Salary based on growth in
performance is achieved. which are linked to the Groups business annual adjusted EPS on a constant

Financial Statements
plans and personal performance currency basis (120%) and an appropriate
objectives during a one year period; cash management measure (30%, provided
Ensuring greater linkage of remuneration a minimum adjusted EPS threshold is
to performance; achieved), as determined by the
Remuneration Committee annually;
Ensuring greater linkage to long term
sustainability and alignment to Group In addition to the above (once the financial
risk management policy; targets have been met) each Executive
Director has individual performance targets
Alignment with shareholders/share
which must also be met to obtain the
value growth; and
maximum incentive level;
Targets are set by the Remuneration
Deferral of the proportion of the Annual
Committee each year.
Incentive earned in excess of 75% of Base
Salary which, once the appropriate taxation
and social security deductions have been
made, will be invested in shares in the
Company and delivered to the Executive
Directors two years following this
investment; and
Deferred incentives may be subject to
clawback to the extent deemed appropriate
by the Remuneration Committee in the
event of a material misstatement of the
published Group results which requires
them to be restated.

www.glanbia.com 73
Governance

REMUNERATiON COMMITTEE REPORT

Key elements of remuneration for Executive Directors

Element Description Objective Details (including maximum value)


Long Term LTIP under which shares The 2008 LTIP aligns the interests of Long Term Incentive individual annual
Incentive Plan are granted in the form of Executive Directors and shareholders award level of a maximum of 150% of Base
a provisional allocation of through a long term share based Salary is determined by reference to three
shares for which no incentive linked to share ownership performance metrics:
exercise price is payable. and holding requirements; and relative TSR against a peer group of
In addition, as part of the overall total companies (30% vests at threshold and
direct compensation package it ensures 100% vests at maximum);
that a greater proportion is based on adjusted EPS growth (50% vests at
long term sustainable results and threshold and 100% vests at maximum);
linkage to key long term performance and
indicators.
an appropriate GIM measure (0% vests
at threshold and 100% vests at
maximum). The appropriate GIM
currently for 2013 and 2014 is return
on capital employed (ROCE) as set
out on page 81.

Each of these performance conditions


represents one third of the maximum
vesting level, unless otherwise determined
by the Remuneration Committee;
Performance is measured over a three
year period;
Share awards will vest early in the event of
a takeover, merger, scheme of arrangement
or other similar event involving a change of
control of the Company, subject to the
pro-rating of the share awards, to reflect
the reduced period of time between the
commencement of the performance period
and the early vesting, although the
Remuneration Committee can decide not
to pro-rate a share award if it regards it as
inappropriate to do so in the particular
circumstances;
A share award shall not vest unless the
Remuneration Committee is satisfied that
the Groups underlying financial
performance has shown a sustained
improvement in the period since the date
of grant. The extent of vesting shall be
determined by the TSR, EPS and GIM
performance conditions as appropriate.
The Remuneration Committee has the
discretion to change the performance
criteria where deemed appropriate; and
Any changes to these performance
conditions will be disclosed in the
Remuneration Committee report which
will be subject to a general shareholder
non-binding advisory vote.

74 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Key elements of remuneration for Executive Directors

Element Description Objective Details (including maximum value)


Shareholding Minimum share Ensure a greater alignment with The Group Managing Director is required to
requirement ownership requirements shareholders interests through build and maintain a shareholding of 200%

Detailed Business Review


to be built up over a five own shareholding. of Base Salary and, for other Executive
year period. Directors, 100% of Base Salary, to be built
up over a maximum of five years;
Executives are expected to build a
shareholding through the vesting of shares
under the Groups 2008 LTIP;
Existing shareholdings and shares acquired in
the market are also taken into account; and
Although share ownership guidelines are
not contractually binding, the Remuneration
Committee retains the discretion to withhold

Governance
future grants under the 2008 LTIP if
executives do not comply with the
guidelines.

Key elements of remuneration for group management committee


The above framework is used for the Group Operating Executive. This framework is also applied to the Group Management Committee

Financial Statements
having incorporated the below changes to create a consistent global approach to reward.

Element Objective Details


Annual Incentive Focus on business line of sight for individuals For Business Unit Chief Executive Officers (CEOs), the Annual
and ensure an appropriate deferral percentage Incentive potential will also be based on appropriate and specific
based on position and role. Business Unit measures, as determined by the Remuneration
Committee; and
Deferral of the proportion of the Annual Incentive earned in excess
of 50% of Base Salary which, once the appropriate taxation and
social security deductions have been made, will be invested in
shares in the Company and delivered to the Business Unit CEOs
two years following this investment.

Long Term Ability to offer increased level of share awards In exceptional cases and in relation to specific local needs (USA)
Incentive in the US market where there are high levels of the maximum share award under the 2008 LTIP scheme may be
long term incentives; and up to 200% of Base Salary; and
Ensure line of sight to business unit metrics. For Business Unit CEOs, the Long Term Incentive level will be
determined by reference to relative TSR, adjusted EPS and
instead of ROCE an appropriate Business Unit measure. Again
each measure is weighted one third of the total maximum.

Shareholding Ensure a greater alignment with shareholders For Business Unit CEOs, the share ownership recommended
guidelines interests through own shareholding. level is 75% of Base Salary to be built up over a maximum period
of five years.

www.glanbia.com 75
Governance

REMUNERATiON COMMITTEE REPORT

Key elements of remuneration for Non-Executive Directors


The remuneration policy for the Group Chairman and Non-Executive Directors is summarised below:

Element Description Objective Details


Fees Annual fixed pay. Recognise market value of role, job size, Set by reference to the relevant market
responsibility and reflects individual skills median based on an external independent
and experience. evaluation of comparator companies of a
similar scale and complexity;
Reflects a base fee for the role of Non-
Executive Director and additional fees
reflecting responsibilities for a sub-
committee of the Board; and
Reviewed from time to time by the
Remuneration Committee and the Board.
Any reviews unless reflecting a change in
role usually take effect from 1st January in
the relevant year.

Benefits and No additional benefits Meet or repay role based expenses Such expenses may include travel in
Expenses are provided other than undertaken during duties of the role the course of the role for the Group.
direct expenses relating for the Group.
to the role.

The Non-Executive Directors do not have existing salary, location, skills and remuneration relinquished when leaving
service contracts, but have letters of experience and expected contribution the former employer and would reflect the
appointment detailing the basis of their to the new role, the current salaries nature, time horizons and performance
appointment. The terms and conditions of of other Executive Directors in the requirements attached to that
appointment of Non-Executive Directors Group and current market levels remuneration. The Committee may grant
are available for inspection at the for the role; share awards on hiring an external
Companys registered office during normal Pension will be considered in light of the candidate to buy out awards which will
business hours and at the AGM of the retirement arrangements which are in be forfeited on leaving the previous
Company. place for the other Executive Directors employer. The Committees approach to
with a contribution level considered by this is to carry out a detailed review of the
The Non-Executive Directors do not have the Committee to be appropriate in light awards which the individual will lose and
periods of notice and the Group has no of the new recruits package as a whole, calculate the estimated value of them. In
obligation to pay compensation when their market practice at the time and internal doing so, the Committee will consider the
appointment terminates. They are subject equities; vesting period, the award exercise period if
to annual re-election at the AGM of the applicable, whether the awards are cash
Company. Other benefits will be considered in light or share based, performance related or
of the provisions in place for the other not, the companys recent performance
Recruitment policy Executive Directors; and payout levels and any other factors
When recruiting new Executive Directors, For Annual Incentive, the Group will the Committee considers appropriate. If a
the Groups policy is to pay what is consider whether it was appropriate for buyout award is to be made, the structure
necessary to attract individuals with the the new recruit to participate in the and level will be carefully designed and will
skills and experience appropriate to the same Annual Incentive plan applicable generally reflect and replicate the previous
role to be filled, taking into account to the current Executive Directors. If this awards as accurately as possible. The
remuneration across the Group, including was considered appropriate, the same award will be made subject to appropriate
other senior executives, and that offered financial measures, weighting, payout claw-back provisions in the event that the
by other international food and nutritional scale and target and maximum bonus individual resigns or is terminated within a
companies and other companies of similar opportunity (as a percentage of Base certain timeframe.
size and complexity. New Executive Salary) which apply to the existing
Directors will generally be appointed on Directors would generally apply to the For an internal appointment, any variable
remuneration packages with the same new recruit; and pay element awarded in respect of the
structure and pay elements as described The award of long term incentives will prior role may be allowed to pay out
in the table on page 73. Each element of depend on the timing of the appointment according to its terms, adjusted as
remuneration to be included in the and where this fits into the typical annual relevant to take into account the
package offered to a new Executive grant cycles. appointment. In addition, any outgoing
Director would be considered separately remuneration obligations existing prior to
and collectively in this context. For an external appointment, although appointment (which are inconsistent with
there are no plans to offer additional cash the policy as disclosed herein) may
On appointment to the Board for either an and/or share based payments on continue, provided they are disclosed in
external or internal candidate: recruitment, the Committee reserves the the Remuneration Committee report and
right to do so when it considers this to be subject to a general shareholder non-
Base Salary levels will be set in in the best interests of the Group, the
consideration of the new recruits binding advisory vote at the earliest
Company and its shareholders. Such
payments may take into account

76 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
opportunity. Although there are no plans to Details of Executive Directors
offer additional cash and/or share-based service contracts
payments on an internal promotion, the The Executive Directors are employed
Committee reserves the right to do so under contracts of employment with
when it considers this to be in the best Glanbia plc (or one of its subsidiary
interests of the Group, the Company and companies).

Detailed Business Review


its shareholders.
No Executive Director has a service
Exit payment policy contract with a notice period in excess of
The letters of appointment for Executive 12 months or with provisions for pre-
Directors do not provide for any determined compensation on termination
compensation for loss of office beyond which exceeds 12 months salary and
payments in lieu of notice, and therefore, benefits-in-kind and accordingly there are
except as may otherwise be required by no service contracts which are required to
Irish law, the maximum amount payable be made available for inspection.
upon termination is limited to 12 months
payment. Policy on external Board appointments

Governance
The long-standing policy of allowing
The Committee retains the discretion to Executive Directors to hold external
make additional payments to Directors non-executive directorships with the prior
upon termination. approval of the Remuneration Committee
will continue. The Remuneration
In the event an Executive Director leaves Committee considers that external
for reasons of death, injury, disability, directorships provide the Groups
redundancy, retirement or any other Executive Directors with valuable

Financial Statements
exceptional circumstance, by agreement experience that is of benefit to Glanbia.
with the Group, which the Remuneration The Remuneration Committee believes
Committee in its absolute discretion that it is reasonable for the individual
permits, any outstanding share awards will Executive Director to retain any fees
be pro-rated for time and performance received from such appointments given
and will vest at the end of the period. the additional personal responsibility that
this entails.
In addition, in the event of a takeover,
merger, scheme of arrangement or other
similar event involving a change of control
of the Company or a demerger of a
substantial part of the Group or a special
dividend which has the effect of materially
changing the Groups business or other
similar event that affects the Companys
shares to a material extent, share awards
will vest early, subject to the pro-rating of
the share awards to reflect the reduced
period of time between the
commencement of the performance
period and the early vesting, although the
Remuneration Committee can decide not
to pro-rate an award if it regards it as
inappropriate to do so in the particular
circumstances.

In all other circumstances, outstanding


share awards will lapse.

There have been no payments made


during the year in relation to compensation
for loss of office.

www.glanbia.com 77
Governance

REMUNERATiON COMMITTEE REPORT

Section B: DIRECTORS REMUNERATION IMPLEMENTATION REPORT


This section of the report explains how Glanbias remuneration policy has been implemented during the financial year.

The remuneration for 2013 for each of the Executive Directors is set out in the table below:

Fixed Variable Total


Annual Incentive
Pension Annual Incentive (deferred into
Salary Contribution Other Benefits (paid in cash)1 shares)2 2013 Total3 2012 Total
000 000 000 000 000 000 000

Executive Directors

S Talbot 433 108 20 325 143 1,029 1,043

M Garvey 56 10 3 42 18 129

H McGuire (4 & 5)
233 35 64 175 77 584

B Phelan 363 107 14 272 120 876

J Moloney (6) 506 126 29 379 167 1,207 1,633

K Toland 95 95 1,199

(1) This reflects the proportion of the Annual Incentive payable to Executive Directors in respect of performance for the year 2013
(which amount to 75% of Base Salary), which will be paid through salary in 2014.
(2) This reflects the proportion of the Annual Incentive (which amounts to 33% of Base Salary) which, once the appropriate taxation
and social security deductions have been made, will be invested in shares in the Company and delivered to the Executive Directors
two years following this investment (2016).
(3) Remuneration disclosed refers to each Directors period of appointment on the Board in 2013.
(4) Other benefits include an overseas allowance of 54,389.
(5) H McGuire will receive an additional 43,841 in the form of shares (Annual Incentive deferred into shares) which relates to
his performance prior to his appointment as Director.
(6) Salaries and other benefits for the period 12 November 2013 to 4 January 2014 (period following J Moloneys retirement from the Board)
amounts to 203,189 of which 27,820 will be invested in Company shares and delivered two years following this investment.

2008 LTIP Comparison of overall


It is expected that share awards granted to performance and pay Total Shareholder return
Executive Directors, under the 2008 LTIP The chart opposite shows the value over
in 2011, will vest in 2014, as follows: the last three financial years of 2100 400
invested in Glanbia plc compared with
Number of Share 350
awards that of 100 invested in the FTSE 350
Food and Beverage Index and the iseq 300
Executive Directors 20 Index. A hypothetical 100 investment 250
in Glanbia plc on 1 January 2011 would
J Moloney (1) 139,462
have generated a total return (inclusive of 200

S Talbot 96,500 original investment) of 340.58 compared 150


with a total return of 166.79 if invested in
H McGuire 50,000 100
the FTSE Food and Beverage Index or
169.69 if invested in the ISEQ 20 Index.
B Phelan 50,000
The Committee believes that, due to the 2011 2012 2013

K Toland (2) 82,901 size/industry of the Group, this bespoke Glanbia FTSE Food & Beverage Index
peer group index is the most appropriate ISEQ 20 Index
(1) Retired 12 November 2013
index against which to compare the
(2) Resigned 5 January 2013 historic TSR of the Group.

78 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Base Salary Brian Phelan is an active member of the In addition to the above (once the financial
Base salaries for the Executive Directors Groups defined benefit plan which is targets have been met) each Executive
are determined by the Remuneration based on an accrual rate of 1/60th of Director had individual performance
Committee as set out on page 73. pensionable salary. targets which must also be met to obtain
the maximum incentive level. The personal
The following table sets out the closing There is provision for Siobhn Talbot and objectives are specific and measurable

Detailed Business Review


2013 Base Salary for each of the Brian Phelan to retire at 60 years of age. and are determined at the commencement
Executive Directors. of the financial year. These comprise each
Hugh McGuire and Mark Garvey individuals contribution to the Group
Base Salary participate in a defined contribution Operating Executive, delivery against
retirement plan, to which contributions projects and initiatives within the scope of
Director Salary are made at an agreed rate. his/her role, and his/her contribution to the
S Talbot 600,000
overall performance of the Group.
M Garvey 400,000 Other benefits
Personal performance of the Executive
Employment-related benefits include
H McGuire 400,000 Directors has been reviewed and all
the use of company cars, medical/life
B Phelan 390,000 relevant objectives have been met.
assurance, relocation costs and overseas

Governance
allowance, where necessary. The performance of the Group during
The salaries for Siobhn Talbot, Brian
Phelan and Hugh McGuire were reviewed the year included adjusted EPS growth
Annual Incentive
with effect from 1 October 2013 (Siobhn) on a constant currency basis of 11.9%
The Group operates a performance-
and 1 June 2013 (Brian and Hugh) to take and closing debt/adjusted EBITDA ratio
related incentive scheme for Executive
into account changes to their roles during of 1.7 times.
Directors and other senior executives as
the year. Details of the changes in their set out on page 73. The Committee In light of the above performance,
roles are set out in the Nomination believes that this method of assessment is the Committee concluded that 108%

Financial Statements
Committee report. Mark Garveys salary transparent, rigorous and balanced, and of Base Salary is payable to each
was set on his appointment to the Board. provides an appropriate and objective Executive Director as set out on page 78.
assessment of annual performance.
Pension
Siobhn Talbot is a deferred member of a For the annual period to 4 January 2014,
Glanbia defined benefit pension scheme. each Executive Director could earn up to
In light of the cap on pension benefits 150% of Base Salary for maximum
introduced in the Finance Act 2006, performance measured against growth in
and subsequently amended in December adjusted EPS on a constant currency
2010, the Remuneration Committee basis and delivery of targeted closing
reviewed the pension arrangements for debt/adjusted EBITDA ratios as set out on
Executive Directors and agreed to offer page 73.
the option to receive a taxable payment
of 25% of salary in lieu of pension benefits
to Siobhn Talbot and John Moloney, with
effect from 1 January 2012.

annual deferred incentive

Agreement of Performance Amount of Annual Incentive Deferral Period Shares delivered


Annual Incentive Period which is below 75% of Base Salary (Two Years)
Level and (One Year) paid in March of the following year
Performance
Conditions Amount of Annual Incentive which
is in excess of 75% of Base Salary
which, once appropriate taxation
and social security deductions
have been made, is invested
in shares

Year 0 Year 1 Year 3

www.glanbia.com 79
Governance

REMUNERATiON COMMITTEE REPORT

Long Term Incentive Plan The below table shows the Groups
The principal Long Term Incentive Plan for adjusted EPS over the performance period. Glanbia vS Peer Group
Executive Directors is the 2008 LTIP, which Total Shareholder return
has received shareholder approval. This 2010 38.07c
Long Term Incentive Plan was amended in
2013 55.46c 350
2012 with shareholder approval. The
combination of the Annual Incentive Plan 300
and the 2008 LTIP provide an appropriate TSR performance condition 250
balance between short term reward and 100% of the TSR element is capable of
long term share based reward in vesting as determined by the Groups TSR 200

accordance with recommended ranking relative to an agreed comparator 150


best practice. group of 13 other international food and
100
nutritional companies. TSR represents the
Long Term Incentives (share awards change in capital value of a listed/quoted 50
with performance periods ending company over a period, plus dividends,
in the year) expressed as a plus or minus percentage
Long term incentive share awards granted of the opening value. 2010 2011 2012 2013
in March 2011 had a three year
performance period ending on 4 January The rationale for using a TSR performance Glanbia Peer group (median)
2014 with 50% of the award subject to condition is that major investors regard
satisfaction of an adjusted EPS growth target TSR as an important indication of both
In light of the above performance against
and 50% subject to a relative TSR earnings and capital growth relative to
the EPS growth and relative TSR targets,
performance target. other major companies in the same sector
the Committee confirmed that 100% of
and to ensure that share awards only vest
EPS performance condition the total 2011 LTIP share award is payable
if there has been a clear improvement in
100% of the EPS element is capable of to each Executive Director.
the Groups relative performance over the
vesting as determined by the rate of growth relevant period. Long Term Incentives (share awards
in EPS as compared to the Consumer Price
made in the financial year)
Index (CPI) over the three year performance The graph opposite shows that, under the
Long term incentive share awards were
period. Adjusted EPS is calculated as the terms of the 2008 LTIP, at 4 January 2014,
made to the Executive Directors in April
profit for the year attributable to the equity a hypothetical 100 invested in Glanbia plc
2013 (Hugh McGuire) and May 2013
holders of the Group before exceptional on 1 January 2011 would have generated
(Siobhn Talbot and Brian Phelan) and will
items and amortisation of intangible assets, a total return (inclusive of original
vest in April 2016 and May 2016
net of related tax. investment) of 340.58 compared with a
respectively, subject to the achievement of
total return of 172.56 if invested in the
The rationale for the EPS performance TSR, EPS and GIM (ROCE) performance
peer group Index. This will result in 100%
condition is that investors consider conditions. The performance period will
of the relative TSR element vesting to each
adjusted EPS to be a key indicator of long end on 2 January 2016. The vesting
Executive Director. The vesting conditions
term financial performance and value conditions are summarised opposite.
are presented below.
creation of a public limited company. In the
three year period ended 4 January 2014, TSR element vesting
the Group delivered growth in adjusted
EPS on a reported basis of 13.36%. This Threshold performance
will result in 100% of the EPS element (Ranked halfway) 30%
vesting to each Executive Director. The Maximum performance
vesting conditions are presented below. (Ranked in top quartile) 100%
EPS element vesting Actual performance
Threshold performance (Three (Ranked in top quartile) 100%
year adjusted EPS Growth equal to
CPI plus 5% compounded (4.84%)) 50%

Maximum performance (Three year


adjusted EPS growth equal to CPI
plus 10% compounded (9.84%)) 100%

Actual performance (Three year


adjusted EPS growth equal to
13.36%) 100%

80 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Performance targets for outstanding share awards
The performance targets for all outstanding 2008 LTIP share awards are set out in the following tables:

Adjusted EPS growth

Detailed Business Review


Vesting Level
0% 50%* 100%*
2011 (50% of award) Three year adjusted Three year adjusted Three year adjusted
2012-2013 (33% of award) EPS growth less than EPS growth equal to EPS growth equal
CPI plus 5% CPI plus 5% to or greater than
compounded compounded CPI plus 10%
compounded

*Straight line vesting between adjusted EPS growth equal to CPI plus 5% compounded
and adjusted EPS growth equal to or greater than CPI plus 10% compounded

Governance
TSR Ranking in the comparator group
Vesting Level
0% 30%* 100%*
2011 (50% of award) Ranked below the Ranked half way Ranked in the top
2012-2013 (33% of award) top half quartile

Financial Statements
*Straight line vesting where ranked between half way and the top quartile

Return on Capital Employed


Vesting Level
0% 0%* 100%*
2012 (33% of award) Less than 12.5% 12.5% 13.5%

2013 (33% of award) Less than 13.5% 13.5% 14.5%


*Straight line vesting between threshold performance (2012: 12.5%, 2013: 13.5%) and
maximum performance (2012: 13.5%, 2013: 14.5%)

2008 LTIP

LTIP granted based Performance Shares vest subject Deferral Shares delivered
on stretch performance Period to the achievement Period
targets (Three Years) of stretch growth targets (One Year)

1/3Growth in adjusted EPS 1/3Growth in adjusted EPS

1/3Relative TSR 1/3Relative TSR

1/3Growth in ROCE 1/3Growth in ROCE

Year 0 Year 3 Year 4

www.glanbia.com 81
Governance

REMUNERATiON COMMITTEE REPORT

Directors shareholdings
As at 4 January 2014, the Executive Directors share ownership against the guidelines was as follows:

% of Base Salary based


Shares held as at on market value as at Compliance with
4 January 2014 4 January 2014 shareholding guidance

Executive Directors

Siobhn Talbot 141,587 261% 200%

Hugh McGuire 89,425 247% 100%

Brian Phelan 85,519 242% 100%

Mark Garvey* % %

*Mark Garvey joined the Group on 12 November 2013 and has a maximum of 5 years to build up his
shareholding in the Company to 100% of his Base Salary

Dilution Shareholder engagement Information subject to audit


Share awards granted under the 2008 implementation of policy in 2014 The information in Tables A, B and C are
LTIP and the Annual Deferred Incentive are Base Salary is reviewed on an annual covered by the Independent Auditors
satisfied through the funding of employee basis. The base salaries of Executive report on page 104. The Tables give
benefit trusts which acquire shares in the Directors for 2014 remain unchanged from details of the Directors remuneration and
market. The employee benefit trusts held 2013 and are set out on page 79. interests in shares in Glanbia plc and
864,898 shares at 4 January 2014. Glanbia Co-operative Society Limited held
For 2014 the Remuneration Committee by Directors and the Group Secretary and
The exercise of share options under the has determined that the Annual Incentive their connected persons as at 4 January
2002 LTIP (which expired in 2012) is opportunity for Executive Directors and 2014. There have been no changes in the
satisfied by the allotment of newly issued senior executives will again be contingent interests listed in Tables B and C between
shares. At 4 January 2014 the total on meeting targets relating to EPS and 5 January 2014 and 11 March 2014. The
number of shares which could be allotted closing debt/adjusted EBITDA ratios and market price of the ordinary shares as at 4
under this scheme was 440,000 shares personal objectives. The Committee has January 2014 was 11.05 and the range
which represent significantly less than reviewed targets for the year to ensure during the year was 8.09 to 11.41. The
one percent of the issued share capital they remain appropriately stretching and average price for the year was 9.77.
of the Company. relevant for the Groups business strategy.

The Group Chairman and The Committee will review the


Non-Executive Directors performance measures for share awards
Liam Herlihy was appointed Group under the 2008 LTIP during 2014 to
Chairman on 28 May 2008. His ensure they remain appropriately
appointment is subject to annual re- stretching in light of the Groups
appointment by the shareholders at the expectations of performance and
AGM of the Company. His appointment as those of external analysts.
Group Chairman will automatically
terminate if he ceases to be a Director of Review of Committee performance
the Company or a Director of Glanbia The Board and Committee assessed its
Co-operative Society Limited. performance, covering its terms of
reference, composition, procedures,
The Group Chairmans fee is set by the contribution and effectiveness. As a result
Remuneration Committee and is 100,000 of that assessment, the Committee is
per annum. This fee reflects the level of satisfied that it is functioning effectively
commitment and responsibility of the role and it has met its terms of reference.
and is set by reference to the relevant
market median based on an external
independent evaluation conducted by
Towers Watson, remuneration consultants.

Results 2013Resolution to receive and consider 2012 Remuneration Committee Report

Total
excluding Total including
For % Against % withheld % Withheld* % withheld
188,418,157 97.16% 5,505,527 2.84% 193,923,684 100% 363,974 0.19% 194,287,658
*Votes withheld are not votes in law

82 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Table A: 2013 Directors Remuneration

Detailed Business Review


The salary, fees and other benefits pursuant to the remuneration package of each Director during the year were:
Annual Annual
Date of Incentive Incentive
appointment/ paid deferred Pension Other 20133 2012
resignation, if Salary Fees in cash1 into shares2 contribution benefits Total Total
applicable 000 000 000 000 000 000 000 000
Executive Directors
S Talbot 433 325 143 108 20 1,029 1,043
M Garvey Apt. 12-Nov-13 56 42 18 10 3 129
H McGuire (4&5) Apt. 1-Jun-13 233 175 77 35 64 584
B Phelan Apt. 1-Jan-13 363 272 120 107 14 876

Governance
J Moloney 6 Ret. 12-Nov-13 506 379 167 126 29 1,207 1,633
K Toland Res. 5-Jan-13 95 95 1,199
2013 1,686 1,193 525 386 130 3,920
2012 1,420
1,025 1,025 342 63 3,875

Non-Executive Directors

Financial Statements
L Herlihy 100 100 100
H Corbally 48 48 48
Mn Keane 48 48 48
J Callaghan 80 80 80
W Carroll 30 30 30
J Doheny 30 30 18
D Farrell 30 30 30
J Gannon Res. 29-May-12 12
D Gaynor Apt. 12-Mar-13 54 54
P Gleeson 30 30 30
V Gorman Apt. 27-Jun-13 15 15
P Haran 68 68 68
B Hayes Res. 5-Jun-13 13 13 30
Ml Keane 30 30 30
J Liston 75 75 75
M Merrick 30 30 30
J Murphy 30 30 30
P Murphy 30 30 30
W Murphy Ret. 1-Jun-13 28 28 68
E Power 30 30 30
R Prendergast Res. 5-Jun-13 13 13 30
2013 812 812
2012 817 817
2013 1,686 812 1,193 525 386 130 4,732
2012 1,420 817 1,025 1,025 342 63 4,692

(1) This reflects the proportion of the Annual Incentive earned by Executive Directors in respect of performance for the year 2013 (which amounts to 75%
of Base Salary) which will be paid through salary in 2014.
(2) This reflects the proportion of the Annual Incentive (which amounts to 33% of Base Salary) which, once the appropriate taxation and social security
deductions have been made, will be invested in shares in the Company and delivered to Executive Directors two years following investment (2016).
(3) Remuneration disclosed refers to each Directors period of appointment to the Board in 2013.
(4) Other benefits includes an overseas allowance of 54,389.
(5) H McGuire will receive an additional 43,841 in the form of shares (Annual Incentive deferred into shares) which relates to performance prior to his
appointment as Director.
(6) Salaries and other benefits paid for the period 12 November 2013 to 4 January 2014 (period following J Moloneys retirement from the Board)
amounts to 203,189, of which 27,820 will be invested in Company shares and delivered two years following this investment.

Details of Directors share options and share awards are set out in pages 86 to 88

www.glanbia.com 83
Governance

REMUNERATiON COMMITTEE REPORT

Table A(1): 2013 Directors Remuneration (continued)

The pension benefits of each of the Executive Directors during the year were as follows:
Transfer value Annual pension Total annual
of increase in accrued in 2013 in accrued pension
accrued pension excess of inflation at 4 January 2014
000 000 000
S Talbot 158
B Phelan 57 7 95
J Moloney 367
K Toland 130
2013 57 7 750
2012 645

S Talbot and J Moloney are deferred members of the Glanbia defined benefit pension scheme.
As a result of the cap on pension benefits introduced in the Finance Act 2006, and subsequently
amended in December 2010, the Remuneration Committee reviewed the pension arrangements
for Executive Directors and agreed to offer the option to receive a taxable payment of 25% of salary
in lieu of future service pension benefit, with effect from 1 January 2012.

DIRECTORS and SECRETARYS INTERESTS

Table B : Directors and Secretarys interests in Glanbia Co-operative Society Limited

As at 4 January 2014 As at 30 December 2012*

A Ordinary Shares C Ordinary Shares A Ordinary Shares C Ordinary Shares


of 1.00 of 0.01 of 1.00 of 0.01
Directors
L Herlihy 79,686 10,686,889 91,425 30,964,543
H Corbally 5,153 363,583 5,912 770,641
Mn Keane 7,612 3,118,390 6,626 3,118,390
S Talbot1 3,000,000 7,742,766
B Phelan(1&2) 16,284,000 21,784,000
W Carroll 17,102 19,621
J Doheny 6,366 341,122 7,304 692,403
D Farrell 4,921 112,000 5,646 462,000
V Gorman 3
3,066 3,066
Ml Keane 19,721 3,000,000 24,232 3,000,000
M Merrick 5,499 6,309
J Murphy 14,237 16,334
P Murphy 11,939 12,143,890 13,698 12,143,890
E Power 23,812 16,284,935 27,320 35,500,443
Secretary
M Horan 574,000 574,000

(1) Executive Director


(2) Appointed 1 January 2013
(3) Appointed 27 June 2013
* Or at date of appointment if later

84 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Table C: Directors and Secretarys interests in Glanbia plc

As at 4 January 2014 As at 30 December 2012*

2008 2002 LTIP 2008 LTIP 2002 LTIP

Detailed Business Review


LTIP Share 2002 LTIP Share Ordinary Share 2002 LTIP Share
Ordinary Shares awards Options awards Shares awards Options awards

Directors
L Herlihy 131,113 91,804
H Corbally 12,536 9,995
Mn Keane 22,849 20,000
S Talbot 1
141,587 243,650 700 65,062 307,000 75,000 7,500
J Callaghan 65,000 65,000
W Carroll 8,435

Governance
J Doheny 14,737 11,596
D Farrell 2,927 500
D Gaynor2 5,000
P Gleeson 23,171 24,923
V Gorman3 2,727 2,727
P Haran 7,462 7,462

Financial Statements
Ml Keane 30,770 26,489
J Liston 25,000 25,000
H McGuire(1&4) 89,425 123,400 89,425 123,400
M Merrick 6,312 3,600
J Murphy 11,022 4,000
P Murphy 27,582 21,692
B Phelan (1&5)
85,519 145,250 750 39,659 176,500 175,000 7,500
E Power 49,296 37,550
Secretary
M Horan 43,079 123,400 26,138 158,500

(1) Executive Director


(2) Appointed 12 March 2013
(3) Appointed 27 June 2013
(4) Appointed 1 June 2013
(5) Appointed 1 January 2013
* Or at date of appointment if later

www.glanbia.com 85
Governance

REMUNERATiON COMMITTEE REPORT

Table C(1): Share Options and LTIP Awards in Glanbia plc - S Talbot

2002 LTIP Share Options

Granted Exercised Lapsed Date of Market value Earliest date


Date of during the during the during the Exercise exercise or at date of exercisable
Grant 30 Dec 12 year year year 4 Jan14 price lapse exercise from Expiry date Note
09-Dec-04 75,000 75,000 2.725 08-Jan-13 8.30 10-Dec-07 08 Jan 13 1
Total: 75,000 75,000

Notes
(1) On 8 January 2013, S Talbot sold 68,000 shares following the exercise of the above options (which resulted in the partial lapse of a related 10% award
connected to the shares). She retained 7,000 of the shares allotted to her and is therefore eligible for a share award of 10% of these shares (700) if she
retains these shares until 8 January 2015.

2008 LTIP Share Awards

Granted Vested Lapsed Market price


during the during the during the at date of Earliest date
Date of Grant 30-Dec-12 year year year 4 Jan 14 award for vesting Expiry date Notes
25-May-10 120,000 120,000 2.82 25-May-13 28-May-13 1
28-Mar-11 96,500 96,500 4.35 28-Mar-14 28-Mar-15 2
30-Aug-12 90,500 90,500 6.26 30-Aug-15 30-Aug-16 3
23-Apr-13 56,650 56,650 10.11 23-Apr-16 23-Apr-17 3
Total: 307,000 56,650 120,000 243,650

Notes
(1) Awards granted on 25 May 2010 were subject to performance conditions measured over the three financial periods ended 29 December 2012.
The outcome of these performance conditions was such that 100% of the awards vested. The vesting date was 28 May 2013 when the Glanbia plc
official opening share price was 10.90.
(2) Awards granted on 28 March 2011 were subject to performance conditions measured over the three financial years ended 4 January 2014.
The outcome of these performance conditions is such that 100% of these awards are expected to vest during 2014.
(3) The performance periods in respect of the 2008 LTIP awards made in 2012 and 2013 are the three financial years ended 2014 and 2015 respectively.
The performance conditions attached to the awards are detailed in the section entitled Performance Targets for Outstanding Awards on page 81.

Deferred Annual Incentive


On 29 May 2013, 26,097 shares in Glanbia plc were allocated to S Talbot (when the Glanbia plc official opening share price was
10.70), being the mandatory deferral of her 2012 Annual Incentive earned in excess of 75% of her Base Salary. On 29 May 2013,
she sold 12,245 shares to fund the payment of the appropriate taxation and social security. The balance of the shares (being 13,852
shares) will be held on trust for her by the trustee of Glanbia plc Section 128D Employee Benefit Trust until 29 May 2015.
These shares are included in the total number of shares held by her as disclosed in Table C on page 85.

86 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Table C(2): Share Options and LTIP Awards - B Phelan

2002 LTIP Share Options

Granted Exercised Lapsed Date of Market value Earliest date


Date of during the during the during the Exercise exercise or at date of exercisable

Detailed Business Review


Grant 30 Dec 12* year year year 4 Jan14 price lapse exercise from Expiry date Note
09-Dec-04 75,000 75,000 2.725 08-Jan-13 8.30 10-Dec-07 08-Jan-13 1
04-Mar-04 100,000 100,000 2.470 08-Jan-13 8.30 05-Mar-07 08-Jan-13
Total: 175,000 175,000

Notes
(1) On 8 January 2013, B Phelan sold 67,500 shares following the exercise of this option (which resulted in the partial lapse of the 10% award attached to
these options granted on 9 December 2004). He retained 7,500 of the shares allotted to him and therefore remains eligible for a share award of 10%
of these shares (750) if he retains these shares until 8 January 2015.

Governance
2008 LTIP Share Awards

Granted Vested Lapsed Market price


during the during the during the at date of Earliest date
Date of Grant 30-Dec-12* year year year 4 Jan 14 award for vesting Expiry date Notes
25-May-10 80,000 80,000 2.82 25-May-13 28-May-13 1
28-Mar-11 50,000 50,000 4.35 28-Mar-14 28-Mar-15 2

Financial Statements
30-Aug-12 46,500 46,500 6.26 30-Aug-15 30-Aug-16 3
23-Apr-13 48,750 48,750 10.11 23-Apr-16 23-Apr-17 3
Total: 176,500 48,750 80,000 145,250

Notes
(1) Awards granted on 25 May 2010 were subject to performance conditions measured over the three financial years ended 29 December 2012.
The outcome of these performance conditions was such that 100% of the awards vested. The vesting date was 28 May 2013 when the Glanbia plc
official opening share price was 10.90.
(2) Awards granted on 28 March 2011 were subject to performance conditions measured over the three financial years ended 4 January 2014.
The outcome of these performance conditions is such that 100% of these awards are expected to vest during 2014.
(3) The performance periods in respect of the 2008 LTIP awards made in 2012 and 2013 are the three financial years ended 2014 and 2015 respectively.
The performance conditions attached to the awards are detailed in the section entitled Performance Targets for Outstanding Awards on page 81.
* or date of appointment if later.

Deferred Annual Incentive


On 29 May 2013, 16,472 shares in Glanbia plc were allocated to B Phelan (when the Glanbia plc official opening share price was
10.70), being the mandatory deferral of his 2012 Annual Incentive earned in excess of 75% of his Base Salary.On 29 May 2013, he
sold 7,728 shares to fund the payment of the appropriate taxation and social security. The balance of the shares (being 8,744 shares)
will be held on trust for him by the trustee of Glanbia plc Section 128D Employee Benefit Trust until 29 May 2015.These shares are
included in the total number of shares held by him as disclosed in Table C on page 85.

www.glanbia.com 87
Governance

REMUNERATiON COMMITTEE REPORT

Table C(3): LTIP Awards - H McGuire

2008 LTIP Share Awards

Granted Vested Lapsed Market price


during the during the during the at date of Earliest date
Date of Grant 30-Dec-12* year year year 4 Jan 14 award for vesting Expiry date Notes
28-Mar-11 50,000 50,000 4.35 28-Mar-14 28-Mar-15 1
30-Aug-12 46,500 46,500 6.26 30-Aug-15 30-Aug-16 2
23-Apr-13 26,900 26,900 10.11 23-Apr-16 23-Apr-17 2
Total : 123,400 123,400

Notes
(1) Awards granted on 28 March 2011 were subject to performance conditions measured over the three financial years ended 4 January 2014.
The outcome of these performance conditions is such that 100% of these awards are expected to vest during 2014.
(2) The performance periods in respect of the 2008 LTIP awards made in 2012 and 2013 are the three financial years ended 2014 and 2015
respectively. The performance conditions attached to the awards are detailed in the section entitled Performance Targets for Outstanding
Awards on page 81.
* or date of appointment if later

Table C(4): LTIP Awards - M Horan

2008 LTIP Share Awards

Granted Vested Lapsed Market price


during the during the during the at date of Earliest date
Date of Grant 30-Dec-12 year year year 4 Jan 14 award for vesting Expiry date Notes
25-May-10 62,000 62,000 2.82 25-May-13 28-May-13 1
28-Mar-11 50,000 50,000 4.35 28-Mar-14 28-Mar-15 2
30-Aug-12 46,500 46,500 6.26 30-Aug-15 30-Aug-16 3
23-Apr-13 26,900 26,900 10.11 23-Apr-16 23-Apr-17 3
Total: 158,500 26,900 62,000 123,400

Notes
(1) Awards granted on 25 May 2010 were subject to performance conditions measured over the three financial years ended 29 December 2012.
The outcome of these performance conditions was such that 100% of the awards vested. The vesting date was 28 May 2013 when the
Glanbia plc official opening share price was 10.90.
(2) Awards granted on 28 March 2011 were subject to performance conditions measured over the three financial years ended 4 January 2014.
The outcome of these performance conditions is such that 100% of these awards are expected to vest during 2014.
(3) The performance periods in respect of the 2008 LTIP awards made in 2012 and 2013 are the three financial years ended 2014 and 2015
respectively. The performance conditions attached to the awards are detailed in the section entitled Performance Targets for Outstanding
Awards on page 81.

Deferred Annual Incentive


On 23 April 2013, 15,134 shares in Glanbia plc were allocated to M Horan (when the Glanbia plc official opening share price was
10.11), being the mandatory deferral of his 2012 Annual Incentive earned in excess of 75% of his Base Salary.On 29 April 2013, he
sold 6,958 shares to fund the payment of the appropriate taxation and social security. The balance of the shares (being 8,176 shares)
will be held on trust for him by the trustee of Glanbia plc Section 128D Employee Benefit Trust until 23 April 2016. These shares are
included in the total number of shares held by him as disclosed in Table C on page 85.

88 Glanbia plc 2013 Annual Report and Accounts


Statement of compliance with UK Corporate Governance Code (2012)
and the Irish Corporate Governance Annex

Strategic Report
As required by the European Communities The Board accepts that the Codes The Group has complied with the detailed

Detailed Business Review


(Directive 2006/46/EC) Regulations 2009 represent an authoritative statement of provisions of the Codes throughout 2013,
(as amended) this Statement of best practice and as such it has reviewed with the exception of provision B.1,
Compliance explains how the Board has its practices relative to them. The Board Composition of the Board and B.7
applied the principles set down in the UK also acknowledges that frequently it is the Re-election. We have explained in detail
Corporate Governance Code (2012) case that laws, regulations and policies do our reasons on pages 91, 92 and 96
(which is referred to in the Listing Rules, not provide guidance on all types of which set out our alternative practice to
applicable to Irish and UK listed behaviour. As a result, we have a code of achieve good governance. The Codes are
companies and which is publicly available conduct for everybody in Glanbia. The not a rigid set of rules and they recognise
on the Financial Reporting Councils Glanbia Code of Conduct is intended as a that an alternative to following a provision
website: www.frc.org.uk/corporate/ code of best practice and provides a may be justified in particular circumstances
ukcgcode.cfm) (the UK Code) and the broad range of guidance about the where good governance is still achieved.
Irish Corporate Governance Annex standards of integrity and business

Governance
published in December 2010 by the Irish conduct expected. Our Code of Conduct We have addressed each Code principle
Stock Exchange and which is publicly is not intended to be a substitute for our in the tables below.
available on the Irish Stock Exchange responsibility and accountability to
website: www.ise.ie/ISE_Regulation/ exercise good judgement and obtain
corporate_governance (the ISE Annex) guidance on proper business conduct.
(collectively the Codes). Glanbia employees are encouraged and
expected to seek additional guidance and

Financial Statements
support from others when in doubt.

COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (2012)

Code of Best Practice Principles Group Statement of Compliance

A DIRECTORS
A.1 The role of the board Our Board consists of the Group Chairman (Liam Herlihy), two Vice-Chairmen (Martin Keane
Every company should be headed and Henry Corbally); 14 other Non-Executive Directors (including John Callaghan, the Senior
by an effective board which is Independent Director) and four Executive Directors (Siobhn Talbot, the Group Managing
collectively responsible for the long Director, Mark Garvey, the Group Finance Director, Brian Phelan, Chief Executive Officer of
term success of the company. Global Ingredients and Hugh McGuire, Chief Executive Officer of Global Performance
Nutrition). 13 of the Non-Executive Directors are currently nominated by our major
shareholder, Glanbia Co-operative Society Limited (the Society).
Our Groups governance structure is based on the leadership principles in the Codes and is
set out on page 58.
The Board and its Committees monitor the application of values, standards and processes.
The core activities of the Board and its Committees are documented and planned on an
annual basis and include an agreed annual calendar of the main business to be considered
at each Board meeting. This forms the basic structure within which the Board operates.
The Directors responsibilities are outlined on pages 56 to 57. The Board meets regularly on
a formal basis plus additional ad hoc meetings as necessary.
The Board held 11 scheduled meetings in 2013 (11: 2012) and one two day planning and
strategy session.
The attendance of each Director at the scheduled Board meetings and the two day planning
and strategy session are shown on page 56.
The Audit, Nomination and Remuneration Committee membership and attendances for all or
part of the year are shown in their respective Reports.

www.glanbia.com 89
Governance

Statement of compliance with UK Corporate Governance Code (2012)


and the Irish Corporate Governance Annex

COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (2012)

Code of Best Practice Principles Group Statement of Compliance

A DIRECTORS
A.2 Division of responsibilities Responsibility is clearly split between the Group Chairman and the Group Managing Director.
There should be a clear division The Group Chairman is responsible for the efficient and effective working of the Board.
of responsibilities at the head of
While the Board is ultimately responsible for the success of the Group, given the size and
the company between the running
complexity of its operations the day to day operations of the Group are managed on a
of the board and the executive
delegated basis by the Group Managing Director and the senior executives working with her.
responsibility for the running of the
companys business. No one The Board appoints the Group Managing Director and monitors her performance in leading
individual should have unfettered the Group. The Group Managing Director is responsible for all aspects of the operation and
powers of decision. management of the Group and its business. Specifically, she is responsible for developing
(for the Boards approval) appropriate values and standards to guide all activities undertaken
by the Group and also for making recommendations on appropriate delegation of responsibilities.
A detailed explanation of their respective responsibilities is set out on page 57.

A.3 The chairman The Group Chairman sets the Boards agenda and ensures that adequate time is available
The chairman is responsible for for the discussion of all agenda items.
leadership of the board and ensuring The Group Chairman promotes a culture of openness and debate. He also ensures
its effectiveness on all aspects of constructive relations between the Executive Directors and the Non-Executive Directors.
its role. The Group Chairman ensures effective communication with shareholders. Further information
may be found on pages 17 and 95.
A detailed explanation of the Group Chairmans responsibilities is set out on page 57.

A.4 Non-executive directors The Non-Executive Directors scrutinise the performance of management, monitor
As part of their role as members the reporting of performance and assist in the development of strategy.
of a unitary board, non-executive The strategic planning process in 2013 spanned three Board meetings commencing with a
directors should constructively dedicated strategic planning meeting to consider the key risks and opportunities facing the
challenge and help develop Group on a rolling five year basis. This was followed by a detailed review by the full Board of
proposals on strategy. each Business Units strategic plan with its management team. At the conclusion of this
process, the Board approved the overall strategic plan (2014-2018) setting the strategic
direction for the Groups next phase of growth.
This approach has been developed to ensure that the Non-Executive Directors can
participate in the development of proposals on strategy and included a full consideration of
the key risks and opportunities facing the Group on a rolling three year basis.
The Senior Independent Director supports the Group Chairman on all governance issues and
is available to shareholders if they have concerns that contact through the normal channels
has failed to resolve.
The Group Chairman holds meetings with the Non-Executive Directors without the Executive
Directors present where considered appropriate.
The Senior Independent Director meets with the Non-Executive Directors without the Group
Chairman being present on such occasions as he considers appropriate.

90 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (2012)

Detailed Business Review


Code of Best Practice Principles Group Statement of Compliance

B Effectiveness
B.1 The composition of the board The Board is pleased to take this opportunity to explain its reasons for its structure and, in
The board and its committees doing so, meet the requirements of the Code to comply or explain. The Board also wishes to
should have the appropriate balance explain why it is justified in the circumstances and how good governance is still achieved.
of skills, experience, independence The Company was formed in 1997 as a result of the merger of Avonmore Foods plc and
and knowledge of the company to Waterford Foods plc. As part of the merger, the Society retains a major shareholding in the
enable them to discharge their Company and nominates from its Board of Directors, which is elected on a three year basis,
respective duties and responsibilities up to14 Non-Executive Directors for appointment to the Board of the Company. This will

Governance
effectively. reduce to eight Non-Executive Directors in 2018, more details of which are set out on page
69 of the Nomination Committee report.
All the Non-Executive Directors are considered by the Board to demonstrate the essential
characteristics of independence and bring independent challenge and deliberations to the
Board through their character, objectivity and integrity. Further information may be found on
page 69 of the Nomination Committee report.
The practical conduct of Board meetings is such that, even though there are currently 13

Financial Statements
Non-Executive Directors appointed by the Society, the views of all the Non-Executive
Directors are given due weight and a collective approach to decision making is adopted.
The Group has an excellent track record in delivering sustained growth in shareholder value.
In the latest three year period, total shareholder return has increased by 240.58% and the
share price has risen from under 3.68 (at the end of 2010) to 11.05 at financial year end
2013, all underpinned by the Groups good governance practices over many years.

B.2 Appointments to the board The Nomination Committee comprises four Non-Executive Directors, of whom two members
There should be a formal, rigorous constitute a quorum, and is responsible for making recommendations to the Board on the
and transparent procedure for the appointment and re-appointment of Directors and planning for the orderly succession of new
appointment of new directors to Directors to the Board. A detailed explanation of the Nomination Committee and its work is
the board. set out in the Nomination Committee report.
Succession planning is used by the Board to deliver two key responsibilities: firstly to ensure
that the Group is managed by executives with the necessary skills, experience and
knowledge; and secondly to ensure that the Board itself has the right balance of individuals
to be able to discharge its responsibilities effectively. The Nomination Committee has specific
responsibilities in this area but the Board as a whole is also involved in overseeing the
development of management resources with the aim of ensuring the Group has the individuals
with the right skills to meet the needs of an increasingly complex and global business.

B.3 Commitment All Non-Executive Directors are advised of the likely time commitments at appointment and
All directors should be able to are asked to seek approval from the Nomination Committee if they wish to take on additional
allocate sufficient time to the external appointments. The ability of individual Directors to allocate sufficient time to the
company to discharge their discharge of their responsibilities is considered as part of the Boards annual evaluation
responsibilities effectively. process overseen by the Group Chairman. Any issues concerning the Group Chairmans
time commitment are dealt with by the Nomination Committee, chaired for this purpose by
the Senior Independent Director.
The terms of appointment of Non-Executive Directors are available for inspection at the
registered office of the Company.

www.glanbia.com 91
Governance

Statement of compliance with UK Corporate Governance Code (2012)


and the Irish Corporate Governance Annex

COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (2012)

Code of Best Practice Principles Group Statement of Compliance

B Effectiveness
B.4 Development An induction programme is agreed for all new Directors aimed at ensuring that they are able
All directors should receive induction to develop an understanding and awareness of the Groups core processes, its people and
on joining the board and should businesses. A typical induction programme covers:
regularly update and refresh their Directors duties, corporate governance and Board proceduresthe Group has a
skills and knowledge. corporate manual which is issued to all Directors and is regularly updated for new
legislation and procedures;
Business planning and internal control processes;
Strategy and planning;
Metrics used to monitor business performance;
Investor relations;
Corporate responsibility (including ethical business conduct, and health and safety);
Internal Audit; and
Site visits.
In addition to the induction programme that all Directors undertake on joining the Board, an
ongoing programme of Director development and Group awareness has been developed.
For example, as part of the annual programme of Board meetings, Directors will typically visit
some of the Groups principal operations to meet employees and gain an understanding of
the Groups products and services. Details of the Directors activity during 2013 are set on
page 50.

B.5 Information and support The Group Chairman, with the assistance of the Group Managing Director and Group
The board should be supplied in a Secretary, is responsible for ensuring that Directors are supplied with information in a timely
timely manner with information in a manner and that it is in a form and of an appropriate quality that enables them to discharge
form and of a quality appropriate to their duties. In the normal course of business, such information is provided by the Group
enable it to discharge its duties. Managing Director in a regular report to the Board that includes information on operational
matters, strategic developments, financial performance relative to the business plan,
business development, corporate responsibility and investor relations.
At each scheduled Board meeting, the Group Managing Director, the Group Finance
Director, the CEO of Global Performance Nutrition and the CEO of Global Ingredients provide
operational and financial updates. Depending on the nature of the proposal to be
considered, other senior executives are invited to make presentations or participate in Board
discussions to ensure that Board decisions are supported by a full analysis of each proposal.
All Directors have access to the advice and services of the Group Secretary, who is
responsible for advising the Board on all governance matters. The Directors also have
access to independent professional advice, if required, at the expense of the Group and this
is coordinated through the Group Secretary.

B.6 Evaluation The Board conducts an annual review of its effectiveness and that of each Board Committee
The board should undertake a formal and Board member. The evaluation of the performance of the Board is to be externally
and rigorous annual evaluation of its facilitated every three years.
own performance and that of its In 2013, we commissioned an independently facilitated Board review conducted by Karl
committees and individual directors. Croke of Board Works. The details of this review, including our objectives, findings and action
plan, are set out in full on page 50.

B.7 Re-election All Directors are ordinarily subject to reelection at every Annual General Meeting (AGM).
All directors should be submitted for Prior to the issue of the notice of the 2013 AGM, the Society informed the Company that
re-election at regular intervals, Brendan Hayes and Robert Prendergast, then Directors of the Company, would cease to be
subject to continued satisfactory Directors of the Society from its first Directors meeting following its 2013 AGM and
performance. consequently, they would be ineligible for membership of the Board of the Company. In those
circumstances Brendan Hayes and Robert Prendergast were not put forward for re-election
at the 2013 AGM.
The Board has recommended that all Directors (with the exception of Jerry Liston as he
indicated his intention to retire prior to the commencement of the AGM) should be put
forward for re-election at the 2014 AGM. Each Director seeking re-election continues to be
effective and demonstrates commitment to their roles.

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C ACCOUNTABILITY
C.1 Financial and business reporting Through this Annual Report and, as required, through other periodic financial statements,
The board should present a balanced the Board is committed to providing shareholders and other stakeholders with a clear
and understandable assessment assessment of the Company and the Groups position and prospects.
of the companys position and A statement of the Directors responsibilities is set out on page 101. A statement by
prospects. the external Auditors about their reporting responsibilities is set out on page 104.
Going Concern

Governance
The Directors continue to report in the annual and half-yearly financial statements that
the business is a going concern.
The Groups business activities, together with the factors likely to affect its future
development, performance and position are set out in the Group Managing Directors
review on pages 12 to 15.
The financial position of the Company and the Group, its cash flows, liquidity position and
borrowing facilities are outlined in the Group Finance Directors review on pages16 to 17.
In addition, note 3 to the financial statements includes the Company and the Groups

Financial Statements
objectives, policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities; and its exposures to
credit risk and liquidity risk. The Company and the Group have considerable financial
resources and a large number of customers and suppliers across different geographic areas
and industries. As a consequence, the Directors believe that the Company and the Group
are well placed to manage its business risks successfully. The Directors have a reasonable
expectation that the Company, and the Group as a whole, have adequate resources to
continue in operational existence for the foreseeable future. For this reason, they continue
to adopt the going concern basis in preparing the financial statements.

C.2 Risk management and The Board has applied principle C.2 of the UK Corporate Governance Code by establishing
internal control a continuous process for identifying, evaluating and managing the significant risks the Group
The board is responsible for faces to ensure that the Groups strategic objectives are achieved. The arrangements
determining the nature and extent of established by the Board for the application of risk are outlined in the Detailed Risk report on
the significant risks it is willing to take pages 38 to 41.
in achieving its strategic objectives. The Audit Committee assists the Board in discharging its review responsibilities in
accordance with the requirements of the revised Turnbull Guidance on Internal Control,
published by the FRC which the Board has fully adopted, and the Codes. In order to assist
the Audit Committee and the Board in their review, the Group has developed a Control Self
Assessment programme. This is subject to regular review. Having undertaken such reviews,
the Audit Committee reports to the Board on its findings so that the Board can take a view
on this matter.
The Board has reviewed the effectiveness of the current systems of risk management and
internal control specifically for the purpose of this statement and are satisfied that these
systems have been operating throughout 2013 and to the date of this report.
The Group also maintains a risk register, which contains the key risks faced by the Group,
including their likelihood and impact, as well as the controls and procedures implemented to
mitigate these risks. The content of the register is determined through regular discussions
with senior management and is reviewed by the Audit Committee.
While the Board is responsible for the Groups system of internal control and for the ongoing
review of its effectiveness, such a system is designed to manage, rather than eliminate, the
risk of failure to achieve business objectives. It can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Board has delegated to the Audit Committee oversight of the management of the
relationship with the Groups external Auditors, further details of which can be found in the
Audit Committee report on pages 60 to 65.
Proper Books of Account
The Directors, through the use of appropriate procedures and systems, have also ensured
that measures are in place to secure compliance with the Company and the Groups
obligation to keep proper books of account. These books of account are kept at the
registered office of the Company.

www.glanbia.com 93
Governance

Statement of compliance with UK Corporate Governance Code (2012)


and the Irish Corporate Governance Annex

COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (2012)

Code of Best Practice Principles Group Statement of Compliance

C ACCOUNTABILITY
C.2 Risk management and Share ownership and dealing
internal control In order to maintain investor confidence in the stock markets, quoted companies have an
The board is responsible for obligation to ensure that their Directors and employees, and anyone closely associated or
determining the nature and extent of connected to them, do not place themselves in positions where investors might suspect
the significant risks it is willing to take them of abusing inside information. For this reason, the Company has issued rules covering
in achieving its strategic objectives. share dealings by Directors and employees who regularly, or even occasionally, have access
to inside information.
The main principle underlying the rules is that no one should trade in shares of the Company
while in possession of inside information about the Company or the Group.
Likewise, no one should deal in the shares of the Company if it would give rise to a suspicion
that they are abusing inside information. As a safeguard against any actual or potential abuse
of these rules, the Company has appointed the Group Secretary and the Group Finance
Director as Compliance Officers, from one of whom approval must be obtained, in advance,
for any share dealings by persons to whom the rules apply. Directors dealings must also be
approved by the Group Chairman.
The interests of the Directors and Secretary and their spouses and minor children in the
share capital of the Company, the holding Society and subsidiary companies and societies
are set out in the Remuneration Committee report on pages 84 to 88.
Main features of Internal control and risk management systems in preparing
consolidated financial statements and financial reporting
Board approval of the annual business and strategic plans following Group
and Business Unit strategy plan reviews;
Monitoring of performance against the annual plan through monthly Board reports
detailing actual versus budgeted results, analysis of material variances, review of key
performance indicators and re-forecasting where required;
Monthly reporting by all Business Units and review by Group Finance;
Well resourced Finance function to facilitate segregation of duties;
Audit Committee review of the integrity of the annual report and half-yearly report. Any
resulting recommendations are included in the Audit Committee Chairmans Board report;
Board review and approval of the Group consolidated half-yearly accounts, consolidated
annual accounts, interim management statements and any formal announcements;
The use of a Group Finance management manual that clearly sets out Group accounting
policies and financial control procedures;
Centralised Taxation and Treasury functions;
Board approved Treasury risk management policies, designed to ensure that Group foreign
exchange and interest rate exposures are managed within defined parameters; and
Appropriate IT security environment.

C.3 Audit committee and auditor A detailed explanation is given in the Audit Committee report on pages 60 to 65.
The board should establish formal The Audit Committee comprises eight Non-Executive Directors, of whom three members
and transparent arrangements for constitute a quorum.
considering how they should apply
the corporate reporting and risk
management and internal control
principles and for maintaining an
appropriate relationship with the
companys auditor.

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Code of Best Practice Principles Group Statement of Compliance

D REMUNERATION
D.1 The level and components Our remuneration strategy and policies focus on using remuneration to facilitate the
of remuneration implementation of a successful corporate strategy that delivers superior earnings growth and
Levels of remuneration should be total shareholder returns for our shareholders over the long term by attracting, retaining and
sufficient to attract, retain and motivating high quality and committed people who are critical to sustain the future
motivate directors of the quality development of the Group.
required to run the company A detailed explanation is given in the Remuneration Committee report on pages 70 to 88.
successfully, but a company should

Governance
avoid paying more than is necessary
for this purpose.
A significant proportion of executive
directors remuneration should be
structured so as to link rewards to
corporate and individual
performance.

Financial Statements
D.2 Procedure Remuneration packages for individual Executive Directors are set by the Remuneration
There should be a formal and Committee after receiving appropriate information from independent sources and Group
transparent procedure for developing Human Resources. The Remuneration Committee comprises six Non-Executive Directors,
policy on executive remuneration of whom three members constitute a quorum. The Group Managing Director and the Group
and for fixing the remuneration Human Resources Director attend Committee meetings by invitation only. They absent
packages of individual directors. themselves when their remuneration is discussed and no Director is involved in considering
No director should be involved in his/her own remuneration.
deciding his or her own
remuneration.

E RELATIONS WITH SHAREHOLDERS


E.1 Dialogue with shareholders The Group has a well developed investor relations programme managed by the Group
There should be a dialogue with Finance Director. This includes regular contact with major shareholders including the Society
shareholders based on the mutual to keep them informed of progress on Group performance. A description of our Investor
understanding of objectives. relations activity during 2013 is set out on page 17.
The board as a whole has
responsibility for ensuring that a
satisfactory dialogue with
shareholders takes place.

E.2 Constructive use of the AGM Whenever possible, all Directors attend the AGM and shareholders are invited to ask
The board should use the AGM to questions during the meeting and have an opportunity to meet with the Directors following
communicate with investors and to the conclusion of the formal part of the meeting. In line with the Codes, details of proxy
encourage their participation. voting by shareholders, including votes withheld, are made available on request and are
placed on the Groups website following the meeting.
To ensure shareholders have time to consider the Annual Report and Financial Statements
and lodge their proxy votes, notice of the AGM and related documents are issued more than
20 working days prior to the meeting. The Company offers all shareholders the choice of
submitting proxy votes either electronically or in paper format. It also offers them the option
to abstain.

www.glanbia.com 95
Governance

Statement of compliance with UK Corporate Governance Code (2012)


and the Irish Corporate Governance Annex

COMPLIANCE WITH ISE ANNEX

Code of Best Practice Principles Group Statement of Compliance


1 Composition of the board A detailed explanation of the rationale for the current Board size and structure is set out
opposite the composition of the board on page 91. Anticipated changes (from 2016 to 2018) to
the Board size and structure are set out on page 69 of the Nomination Committee report.
All the Non-Executive Directors are considered by the Board to demonstrate the essential
characteristics of independence and bring independent challenge and deliberations to the
Board through their character, objectivity and integrity. Further information may be found on
page 69 of the Nomination Committee report.
Our Directors come from a diversity of backgrounds, ranging from public service, accountancy
and banking to industry (dairy, pharmaceutical, fast moving consumer goods and production).
A detailed description of the skills, expertise and experience that each of the Directors brings
to the Board is set out on pages 52 to 55. The date of appointment of each Director, the length
of service of each Director as a Director is given on page 56 and, where applicable,
the length of service of each Director on a Board Committee is also given in the respective
Committee reports.
We involve all Directors in formulating our strategic business plan (which is the route map
which guides us to meet our objectives and provides a vital framework within which the
Group operates) and in all key decision making.
The Group Chairman ensures that the skills, expertise and experience of the Board are
harnessed to best effect in addressing significant issues facing the Group by ensuring:
(i) Directors are properly informed on all matters; (ii) that discussions foster constructive
challenge and debate; and (iii) that adequate time is provided for discussions so that
the view of each Director is presented and considered.
Directors roles and responsibilities are clarified from the outset and continually updated to
reflect the evolving business and changing dynamics. We encourage training and personal
development, and as part of the annual evaluation process, the Group Chairman discusses
individual training and development requirements for each Director. Additionally, the Senior
Independent Director is available to all fellow Non-Executive Directors, either individually or
collectively, to discuss any matters of concern in a forum that does not include Executive
Directors or the management of the Company.
2 Board appointments A detailed explanation is given in the Nomination Committee report on pages 66 to 69.

96 Glanbia plc 2013 Annual Report and Accounts


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Code of Best Practice Principles Group Statement of Compliance
3 Board evaluation We have established a formal process for the annual evaluation of the performance of the Board,
its principal Committees and individual Directors. The objective of the annual Board evaluation is
to provide assurance to our shareholders and other stakeholders that we are committed to the
highest standards of governance and probity, and to gain insight into Board effectiveness to help
the Board perform as well as possible and help the Board understand how well it is operating in
key areas. These include: Board performance and strategic oversight, risk management and
internal control, Board Committees, succession planning and talent management, Board
processes, culture and relationships, diversity, individual performance; including Chairman and
CEO performance, priorities to enhance Board performance.

Governance
In 2013, we commissioned an independently facilitated Board review conducted by Karl Croke
of Board Works. The details of this review, including our objectives, findings and action plan,
are set out in full on page 50.
The Board evaluation process was as follows:
Meeting with the Group Chairman and Group Secretary to agree the terms of reference,
methodology and timelines;
Development of the questionnaire which encompassed the main Board and Committees.

Financial Statements
Completion of the questionnaire by each Board member;
Confidential one to one interview with each Board member. The interview reviewed each
Board members completed questionnaire and also encompassed broader Board issues;
Analysis by Karl Croke of Board Works of the completed questionnaires and interviews;
Report completion;
Presentation to the Board;
Agreed action.

4 Board re-election A detailed explanation is given in the Nomination Committee report on pages 66 to 69.

5 Audit committee A detailed explanation is given in the Audit Committee report on pages 60 to 65 and
the Detailed Risk report on pages 38 to 41.

6 Remuneration A detailed explanation is given in the Remuneration report and throughout this Annual Report.

www.glanbia.com 97
Governance

OTHER STATUTORY INFORMATION

Principal activities Retirement of Directors At the 2013 AGM, shareholders also


Glanbia plc is a global performance In accordance with the UK Corporate authorised the maximum and minimum
nutrition and ingredients group, Governance Code (2012), all Directors will prices at which the Company may reissue
headquartered in Ireland, with operations retire at the 2014 AGM and, being eligible, off-market such shares as it may
in 32 countries including Ireland, mainland offer themselves for re-appointment purchase. This authority will expire at the
Europe, the USA, Africa and Asia. with the exception of Jerry Liston, who is earlier of the conclusion of the 2014 AGM
retiring from the Board. or 20 August 2014 and a resolution will
Further detail can be found in: not be proposed at the 2014 AGM to
Where We Operate on pages 6 to 7. Annual General Meeting renew this authority.
The Directors have set out in this report a The Companys AGM will be held on 13
May 2014. Full details of the AGM, Dividends
fair review of the business of the Group
together with explanations of the An interim dividend of 4.03 cent per
during the financial year ended 4 January
resolutions to be proposed, are contained share was paid on 11 October 2013 to
2014, including an analysis of the position
in the Notice of Meeting available on the shareholders on the register at the close
of the Group at the end of the financial
Groups website: www.glanbia.com of business on 30 August 2013. The
year and a description of the principal risks
and, if requested, posted with this Directors propose a final dividend of 5.97
and uncertainties facing the Group (known
Annual Report. cent per share. Subject to shareholder
as a Business Review).
approval, the final dividend will be paid on
The information that fulfils the Business Powers of the Directors 16 May 2014 to shareholders on the share
Review requirements can be found in the The Directors are responsible for the register on 4 April 2014.
Strategic Report and Detailed Business management of the business of the
Company and the Group and may Following approval of shareholders at the
Review sections of this report on
exercise all powers of the Company AGM in 2010, all dividend payments will
pages 2 to 47. A description of the
subject to applicable legislation and be made by direct credit transfer into a
Groups Business Model and Strategy
regulation and the Articles of Association. nominated bank or financial institution. If a
for delivering its objectives is set out
At the 2013 AGM, the Directors were shareholder has not provided his/her
on pages 20 to 27.
given the power to issue new shares up to account details prior to the payment of the
Process for appointment of Directors a nominal amount of 628,458.96. This dividend, a shareholder will be sent the
In addition to the Companies Acts, the power will expire on the earlier of the normal tax voucher advising a shareholder
Articles of Association of the Company conclusion of the 2014 AGM or 20 August of the amount of his/her dividend and that
contain provisions regarding the 2014. Accordingly, a resolution will be the amount is being held because his/her
appointment and retirement of Directors. proposed at the 2014 AGM to renew direct credit transfer instructions had not
At each Annual General Meeting (AGM) the Companys authority to issue further been received in time.
the Articles of Association provide that new shares.
A shareholders dividends will not accrue
each Director who has been in office at the
At the 2013 AGM, the Directors were also interest while they are held. Payment will
conclusion of each of the three preceding
given the power to disapply the strict be transferred to a shareholders account
AGMs and who has not been appointed
statutory pre-emption provisions in the as soon as possible on receipt of his/her
or re-appointed at either of the two most
event of a rights issue or in any other issue direct credit transfer instructions.
recently held of those three meetings shall
up to an aggregate nominal amount of Additionally, if a shareholders registered
retire from office. No person other than a
628,458.96. This authority too will expire address is in the UK and a shareholder
Director retiring by rotation shall be
on the earlier of the conclusion of the 2014 has not previously provided the Company
appointed a Director at any general
AGM or 20 August 2014. A resolution will with a mandate form for an Irish euro
meeting unless he is recommended by the
be proposed at the 2014 AGM to renew account, a shareholders dividend will
Directors or, not less than seven nor more
this authority. default to a sterling payment. All other
than forty two days before the date
shareholders dividends will default to a
appointed for the meeting, notice
At the 2013 AGM, the Directors were euro payment.
executed by a member qualified to vote at
given the power to buy back a maximum
the meeting has been given to the
number of 29,552,568 ordinary shares
Company of the intention to propose that
(equivalent to 10% of its own shares)
person for appointment. If a Director is
within a price range specified in the
also a Director of Glanbia Co-operative
resolution. A resolution will not be
Society Limited (the Society), the
proposed at the 2014 AGM to renew
Articles of Association provide that his
the Companys authority to acquire its
appointment as a Director shall terminate
own shares.
automatically in the event of his ceasing to
be a Director of the Society.

The Articles of Association also contain


provisions regarding the automatic
retirement of a Director in certain other
limited circumstances.

98 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Political donations Restrictions on transfer of shares Restrictions on voting deadlines

Detailed Business Review


The Electoral Act, 1997 as amended With the exception of restrictions on The notice of any general meeting shall
requires companies to disclose all political transfer of shares under the Companys specify the deadline for exercising voting
donations over 200 in aggregate made share schemes, while the shares are rights and appointing a proxy or proxies to
during the financial year. The Directors, subject to the schemes, there are no vote in relation to resolutions to be
on enquiry, have satisfied themselves restrictions on the voting rights attaching proposed at the general meeting. The
that no payment or other donations in to the Companys ordinary shares or the number of proxy votes for, against or
excess of this amount have been made transfer of securities in the Company. withheld in respect of each resolution are
by the Group. Under the Articles of Association of the published on the Groups website after the
Company, the Directors have the power to meeting.
Issued share capital impose restrictions on the exercise of
At 4 January 2014 the authorised share rights attaching to share(s) where the Memorandum and Articles
capital of the Company was 306,000,000 holder of the share(s) fails to disclose the of Association

Governance
ordinary shares of 0.06 each and the identity of any person who may have an The Companys Memorandum and Articles
issued share capital was 295,645,684 interest in those shares. No person holds of Association set out the objects and
(2012: 294,955,684) ordinary shares of securities in the Company carrying special powers of the Company. The Articles of
0.06 each, of which 41.3% was held by rights with regard to control of the Association detail the rights attaching to
the Society. All the Companys shares are Company. The Company is not aware of the shares; the method by which the
fully paid up and quoted on the Irish and any agreements between holders of Companys shares may be purchased or
London Stock Exchanges. During the year securities that may result in restrictions in re-issued; the provisions which apply to

Financial Statements
690,000 ordinary shares of 0.06 each were the transfer of securities or voting rights. the holding of and voting at general
allotted, upon the exercise of outstanding meetings; and the rules relating to the
share options under the 2002 LTIP. Exercise of rights of shares Directors, including their appointment,
in employee share schemes retirement, re-election, duties and powers.
Details of the Companys share capital and As detailed in note 22 to the financial A copy of the Memorandum and Articles
shares under option or award at 4 January statements at 4 January 2014, 864,898 of Association can be obtained from the
2014 are given in notes 22 and 23 to the
ordinary shares were held in employee Groups website: www.glanbia.com.
financial statements.
benefit trusts for the purpose of the
Groups employee share schemes. Unless expressly specified to the contrary
Rights and obligations in the Articles of Association of the
The Trustees of the employee trusts do
of ordinary shares Company, the Companys Memorandum
not seek to exercise voting rights on
On a show of hands at a general meeting and Articles of Association may be
shares held in the employee trusts other
every holder of ordinary shares present in amended by special resolution of the
than on the direction of the underlying
person or by proxy and entitled to vote Companys shareholders.
beneficiaries. No voting rights are
shall have one vote. On a poll, every
exercised in relation to shares
shareholder present in person or by proxy,
unallocated to individual beneficiaries.
shall have one vote for every ordinary
share held. In accordance with the Rights under the Shareholders Rights
provisions of the Articles of Association, (Directive 2007/36/EC) Regulations 2009
holders of ordinary shares are entitled to a Shareholder(s) have the right to ask
dividend where declared or paid out of questions related to items on the agenda
profits available for such purposes. On a of a general meeting and to receive
return of capital on a winding up, holders answers, subject to certain qualifications.
of ordinary shares are entitled to Shareholder(s) holding 3% of the issued
participate. share capital of the Company, representing
at least 3% of its total voting rights, have
the right to put items on the agenda and
to table draft resolutions at AGMs. The
request must be received by the Company
at least 42 days before the relevant
meeting. Further details of shareholders
rights under the Shareholders Rights
(Directive 2007/36/EC) Regulations 2009
are contained in the notice of the 2014
AGM available on the Group website:
www.glanbia.com and, if requested,
posted with this Annual Report.

www.glanbia.com 99
Governance

OTHER STATUTORY INFORMATION

Substantial interests
The Company has been advised of the following notifiable interests in its ordinary share
capital:

No of % of issued No of % of issued
ordinary share Capital ordinary share Capital
shares as at as at shares as at as at
Shareholder 4/01/2014 4/01/2014 11/03/2014 11/03/2014
Glanbia Co-operative
Society Limited 122,108,880 41.3% 122,108,880 41.3%
Capital Group
Companies, Inc 12,050,287 4.07% 14,885,551 5.03%

Change of control provisions Corporate social responsibility


The Group has certain debt facilities which Glanbia is focused on corporate social
may require repayment in the event that a responsibility in three areas our
change in control occurs with respect to employees, the environment and our
the Group. local communities.

There are also a number of agreements More particular details of which are
that take effect, alter or terminate upon a summarised in Corporate social
change of control of the Group, which responsibility on pages 42 to 47.
include the Groups Joint Ventures with
Leprino Foods Company and PZ Cussons Subsidiary and associated
plc. If a third party were to acquire control undertakings
of the Group, Leprino Foods Company A list of the principal subsidiary and
could elect to terminate its Joint Venture associated undertakings is included
with the Group and, if this were to occur, in note 39 to the financial statements.
the Group could then be required to sell its
shareholding in the Joint Venture to Accountability and audit
Leprino Foods Company at a price equal Financial reporting
to its fair value. In the same circumstances Directors responsibilities for preparing the
PZ Cussons plc can also elect to terminate Financial Statements for the Company and
its Nutricima Joint Venture with the Group the Group are detailed on page 101.
and, if this were to occur, the Group could
The Independent Auditors Report details
then be required to sell to PZ Cussons plc,
the respective responsibilities of Directors
at a nominal price, certain trade marks
and external Auditors.
which were originally transferred from the
PZ Cussons group to the Nutricima External Auditors
business. The Nutricima Joint Venture The external Auditors,
company would then be wound up. PricewaterhouseCoopers, have
expressed their willingness to continue in
In addition, the Companys employee
office in accordance with Section 160(2) of
share plans contain change of control
the Companies Act,1963.
provisions which can allow for the
acceleration of the exercisability of share
options and the vesting of share awards in
the event of a change of control.

The Board is satisfied that no change of


control provisions has occurred in respect
of these agreements.

100 Glanbia plc 2013 Annual Report and Accounts


Statement of Directors Responsibilities

Strategic Report
The Directors are responsible for preparing The Directors are also required by Each of the current Directors, whose

Detailed Business Review


the Annual Report and the Financial applicable law and the Listing Rules issued names and functions are listed on pages
Statements in accordance with applicable by the Irish Stock Exchange to prepare a 52 to 57 confirms that they consider that
law and regulations. Irish company law Directors report and reports relating to the Annual Report and Financial
requires the Directors to prepare Financial Directors remuneration and corporate Statements, taken as a whole is fair,
Statements for each financial year. Under governance and the Directors are required balanced and understandable and
that law the Directors have prepared the to include a management report provides the information necessary for
Financial Statements in accordance with containing a fair review of the business shareholders to assess the Companys
International Financial Reporting Standards and a description of the principal risks and and the Groups performance, business
(IFRSs) as adopted by the European uncertainties facing the Group. model and strategy. Each of the current
Union. The Financial Statements are Directors also confirms that to the best
required by law to give a true and fair The Directors are responsible for keeping of each persons knowledge and belief:
view of the state of affairs of the Company proper books of account that disclose with

Governance
and the Group and of the profit or loss reasonable accuracy at any time the the Financial Statements prepared in
of the Group. financial position of the Company and the accordance with IFRS as adopted by
Group and to enable them to ensure that the EU give a true and fair view of the
In preparing these Financial Statements the Financial Statements comply with the assets, liabilities and financial position
the Directors are required to: Companies Acts 1963 to 2013 and, as of the Company and the Group and of
regards the Group Financial Statements, the profit of the Group; and
select suitable accounting policies article 4 of the IAS Regulation. They are the Directors Report contained in the
and then apply them consistently;

Financial Statements
also responsible for safeguarding the Annual Report includes a fair review of
make judgements and estimates assets of the Company and the Group and the development and performance of
that are reasonable and prudent; hence for taking reasonable steps for the the business and the position of the
state that the Financial Statements prevention and detection of fraud and Company and Group, together with a
comply with IFRSs as adopted by the other irregularities. The Directors are description of the principal risks and
European Union; and responsible for the maintenance and uncertainties that they face.
integrity of certain corporate and financial
Prepare the Financial Statements on information included on the Groups
the going concern basis, unless it is website. Legislation in Ireland concerning
inappropriate to presume that the Group the preparation and dissemination of
will continue in business, in which case Financial Statements may differ from
there should be supporting assumptions legislation in other jurisdictions.
or qualifications as necessary.

Directors Report
On behalf of the Board

Liam Herlihy Siobhn Talbot Mark Garvey


Directors
11 March 2014

101
www.glanbia.com
Brand power
BUILDING THE LARGEST global
PERFORMANCE NUTRITION company

Charles Hemmingway
Global Performancce
Nutrition

brand power

We lead through insight driven


consumer engagement that
ingrains our brands in their
fitness lifestyle. We succeed by
enabling our consumers to
achieve, with education on how
to accomplish their fitness goals
across digital, social, and face
to face interaction that motivates
them to stick with it.

We maximize our relevance


with regional marketing and
customer collaboration to
localise activities. We grow by
turning our loyal consumers into
brand advocates that share their
passion for our brands in the
gyms and across social media
as they are our best marketers.

Our mission is to be the


first choice of athletes
and fitness enthusiasts
everywhere to help them
achieve their goals
through the highest-
quality, most innovative
performance nutrition
products.

102 Glanbia plc 2013 Annual Report and Accounts


FINANCIAL STATEMENTS

Independent Auditors report 104


Group income statement 108
Group statement of comprehensive income 109
Group statement of changes in equity 110
Group balance sheet 111
Group statement of cash flows 112
Company balance sheet 113
Company statement of changes in equity 114
Company statement of comprehensive income
and statement of cash flows 115
Notes to the financial statements 116
Shareholders information 177
Contacts 180

103
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Financial Statements

independent auditors report to the members of glanbia PLC

Report on the Financial Statements What an audit of Financial Statements involves


We conducted our audit in accordance with International
Our opinion Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)).
In our opinion: An audit involves obtaining evidence about the amounts and
disclosures in the Financial Statements sufficient to give
the Group Financial Statements give a true and fair view, in
reasonable assurance that the Financial Statements are free from
accordance with International Financial Reporting Standards
material misstatement, whether caused by fraud or error. This
(IFRSs) as adopted by the European Union, of the state of the
includes an assessment of:
Groups affairs as at 04 January 2014 and of its profit and cash
flows for the year then ended; whether the accounting policies are appropriate to the Groups
the Company Financial Statements give a true and fair view, in and Parent Companys circumstances and have been
accordance with IFRSs as adopted by the European Union as consistently applied and adequately disclosed;
applied in accordance with the provisions of the Companies the reasonableness of significant accounting estimates made
Acts 1963 to 2013, of the state of the Companys affairs as at by the Directors; and
04 January 2014 and of its cash flows for the year then ended;
and the overall presentation of the Financial Statements.
the Group and Company Financial Statements have been In addition, we read all the financial and non-financial information
properly prepared in accordance with the requirements of the in the Annual Report to identify material inconsistencies with the
Companies Acts 1963 to 2013 and, as regards the Group audited Financial Statements and to identify any information that
Financial Statements, Article 4 of the IAS Regulation. is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
This opinion is to be read in the context of what we say below. performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
What we have audited implications for our report.
The Group Financial Statements and Company Financial
Statements (the Financial Statements), which are prepared by Overview of our audit approach
Glanbia plc, comprise: Materiality
We set certain thresholds for materiality. These helped us to
the Group and Company Balance Sheets as at 04 January determine the nature, timing and extent of our audit procedures
2014; and to evaluate the effect of misstatements, both individually and
the Group Income Statement and Group and Company on the Financial Statements as a whole.
Statements of Comprehensive Income for the year then ended;
Based on our professional judgement, we determined materiality
the Group and Company Statements of Changes in Equity and for the Group Financial Statements as a whole to be 8 million,
Statements of Cash Flows for the year then ended; and which is approximately 5% of profit before tax and exceptional
the notes to the Financial Statements, which include a items (to exclude the effect of volatility).
summary of significant accounting policies and other
explanatory information. We agreed with the Audit Committee that we would report to
them misstatements identified during our audit above 400,000
The financial reporting framework that has been applied in their as well as misstatements below that amount that, in our view,
preparation comprises Irish law and IFRSs as adopted by the warranted reporting for qualitative reasons.
European Union and, as regards the Company, as applied in
accordance with the provisions of the Companies Acts 1963 to Overview of the scope of our audit
2013. The Group is structured along four business segments, Global
Performance Nutrition, Global Ingredients, Dairy Ireland and Joint
Certain disclosures required by the financial reporting framework Ventures and Associates. The Group Financial Statements are a
have been presented elsewhere in the Annual Report rather than consolidation of 32 reporting units, comprising the Groups
in the notes to the Financial Statements. These are cross- operating businesses and centralised functions.
referenced from the Financial Statements and are identified as
audited. In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed at the
reporting units by us, as the Group engagement team, or
component auditors within PwC ROI and from other PwC
network firms operating under our instruction. Where the work
was performed by component auditors, we determined the level
of involvement we needed to have in the audit work at those
reporting units to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for our
opinion on the Group Financial Statements as a whole.

104 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Our Group audit scope focused on eighteen Glanbia reporting Goodwill and indefinite life intangible assets

Detailed Business Review


entities. Eleven subsidiaries and joint ventures including the impairment assessment
primary central reporting entity which controls Group functions Area of focus
including those covering treasury, taxation and pensions, were We focused on this area because the determination of whether
subject to an audit of their full financial information. Glanbia an impairment charge for goodwill or indefinite life intangible
Ingredients Ireland Limited, a material associate, which while not assets was necessary involved significant judgements in
controlled by the Group, was also subject to an audit of their full estimating the future results of the business.
financial information.
Refer also to note 15 to the Financial Statements.
These operations which were subject to a full scope audit
accounted for approximately 88 per cent of Group turnover and How the scope of our audit addressed the area of focus
in excess of 90 per cent of Group profit before tax. Taken We evaluated managements future cash flow forecasts, and the
collectively these reporting entities represent the principal process by which they were drawn up, including comparing them

Governance
Business Units of the Group. to the latest Board approved budgets, and testing the underlying
calculations.
Specific audit procedures on certain balances and transactions
were performed at six of the remaining reporting units. This, We challenged managements key assumptions for growth rates
together with additional procedures performed at the Group level, in the forecasts by considering the Groups historic growth rates
gave us the evidence we needed for our opinion on the Group and its achievement of past strategic objectives.
Financial Statements as a whole.
We challenged the discount rate used by recalculating the cost of

Financial Statements
The Group audit team follows a programme of planned site visits capital for the Group using observable inputs from independent
that is designed so that senior team members visit the full scope sources. We also benchmarked the discount rate used against
audit reporting entities regularly on a rotational basis. In addition the published cost of capital for comparable organisations.
to these visits, meetings are held with each full scope reporting
entitys component auditors at least once a year. We performed sensitivity analysis around the key drivers of
managements impairment testing models including growth rates
For the year ended 04 January 2014 ten reporting entities were applied to the cash flow forecasts and the discount rate.
visited. Post audit conference calls were held with component
auditors for any entities not visited during the year by the Group Provision for income taxes
audit team. Area of focus
As described in the critical accounting judgements section in note
Areas of particular audit focus 4, the Group is subject to income tax in numerous jurisdictions
In preparing the Financial Statements, the Directors made a and significant judgement is required in determining the
number of subjective judgements, for example in respect of worldwide provision for income taxes as there are many
significant accounting estimates that involved making transactions during the ordinary course of business for which the
assumptions and considering future events that are inherently ultimate tax determination is uncertain.
uncertain. We primarily focused our work in these areas by
assessing the Directors judgements against available evidence, This area required our focus as there is a level of estimation and
forming our own judgements, and evaluating the disclosures in judgement in calculating such liabilities.
the Financial Statements.
How the scope of our audit addressed the area of focus
In our audit, we tested and examined information, using sampling We obtained an understanding of the critical accounting
and other auditing techniques, to the extent we considered judgements made in the estimation of these liabilities through
necessary to provide a reasonable basis for us to draw discussions with management and the Groups in-house tax
conclusions. We obtained audit evidence through testing the specialists.
effectiveness of controls, substantive procedures or a
We challenged judgements used and estimates made by
combination of both.
management to support the provision for uncertain tax positions.
We considered the following areas to be those that required This included holding discussions with our in-house taxation
particular focus in the current year. This is not a complete list of all specialists to assist us in evaluating the assumptions and
risks or areas of focus identified by our audit. We discussed these methodologies used by the Group in calculating tax liabilities.
areas of focus with the Audit Committee. Their report on those
We read the relevant correspondence between the Group and
matters that they considered to be significant issues in relation to
relevant tax authorities.
the Financial Statements is set out on page 63.

105
www.glanbia.com
Financial Statements

independent auditors report to the members of glanbia PLC

Pension liabilities Risk of management override of internal controls


Area of focus Area of focus
The magnitude of the deficits on the Groups defined benefit ISAs (UK & Ireland) require that we consider this.
pension schemes included on the Balance Sheet is dependent on
a number of key estimates, a significant assumption being the How the scope of our audit addressed the area of focus
discount rate at year end. Assumptions regarding mortality rates We assessed the overall control environment of the Group,
are also important. A modest change in such assumptions can including the arrangements for staff to whistle-blow
result in a material change in the value of the overall deficit. inappropriate actions, and interviewed senior management and
the Groups internal audit function. We examined the significant
The Group also recognised an exceptional gain during the year accounting estimates and judgements relevant to the Financial
arising from revisions to the Groups pension arrangements for Statements for evidence of bias by the directors that may
two smaller Irish defined benefit schemes. The calculation of this represent a risk of material misstatement due to fraud. We also
gain involves a degree of estimation as it is partly based on tested journal entries.
actuarial assumptions.
Going Concern
How the scope of our audit addressed the area of focus Under the Listing Rules of the Irish Stock Exchange we are
We challenged the reasonableness of the actuarial assumptions required to review the Directors statement in relation to going
used by management, by holding dialogue with our in-house concern. We have nothing to report having performed our review.
actuaries and comparing the assumptions to third party
benchmark data. As noted in the Statement of Directors responsibilities, the
Directors have concluded that it is appropriate to prepare
We independently assessed the calculation of the gain, the Groups and Companys Financial Statements using the going
challenged the reasonableness of the actuarial assumptions used concern basis of accounting. The going concern basis presumes
and viewed correspondence between the Trustees and Irish that the Group and Company have adequate resources to remain
Pension Board. in operation, and that the Directors intend them to do so, for at
least one year from the date the Financial Statements were
Fraud in revenue recognition signed. As part of our audit we have concluded that the Directors
Area of focus use of the going concern basis is appropriate.
ISAs (UK & Ireland) presume there is a risk of fraud in revenue
recognition because of the pressure management may feel to However, because not all future events or conditions can
achieve the planned results. be predicted, these statements are not a guarantee as to
the Groups and the Companys ability to continue as a
How the scope of our audit addressed the area of focus going concern.
As the foundation of the evidence we obtained regarding the
revenue recognised during the year, we evaluated the relevant IT
systems and tested the internal controls over the completeness, Matters on which we are required
accuracy and timing of revenue recognised in the Financial to report by the Companies Acts
Statements. We also tested certain journal entries posted to 1963 to 2013
revenue accounts to identify unusual or irregular items.
We have obtained all the information and explanations which
We tested a sample of credit notes recorded during the year and we consider necessary for the purposes of our audit.
after the year end to ensure appropriate revenue recognition. We In our opinion proper books of account have been kept by the
traced a sample of sales recorded during the year to delivery Company.
documentation and cash remittance.
The Company Balance Sheet is in agreement with the books
We read extracts of relevant customer agreements and tested the of account.
amounts recorded for rebate arrangements in Global In our opinion the information given in the Directors Report is
Performance Nutrition and in Consumer Foods Ireland by consistent with the Financial Statements and the description in
independently recalculating rebate amounts based on the the Corporate Governance Statement of the main features of
underlying customer agreements and the observable sales data the internal control and risk management systems in relation to
of the entity. the process for preparing the Group Financial Statements is
consistent with the Group Financial Statements.
The net assets of the Company, as stated in the Company
Balance Sheet, are more than half of the amount of its
called-up share capital and, in our opinion, on that basis there
did not exist at 04 January 2014 a financial situation which
under Section 40 (1) of the Companies (Amendment) Act,
1983 would require the convening of an extraordinary general
meeting of the Company.

106 Glanbia plc 2013 Annual Report and Accounts


Strategic Report
Matters on which we are required to Responsibilities for the Financial

Detailed Business Review


report by exception Statements and the audit
Directors remuneration and transactions Our responsibilities and those of the Directors
Under the Companies Acts 1963 to 2013 we are required to As explained more fully in the Directors Responsibilities
report if, in our opinion, the disclosure of Directors remuneration Statement set out on page 101, the Directors are responsible for
and transactions specified by law have not been made, and the preparation of the Group and Company Financial Statements
under the Listing Rules of the Irish Stock Exchange we are giving a true and fair view.
required to review the six specified elements of disclosures in the
report to shareholders by the Board on Directors remuneration. Our responsibility is to audit and express an opinion on the Group
We have nothing to report arising from these responsibilities. and Company Financial Statements in accordance with Irish law
and ISAs (UK & Ireland). Those standards require us to comply
Corporate Governance Statement with the Auditing Practices Boards Ethical Standards for Auditors.

Governance
Under the Listing Rules of the Irish Stock Exchange we are
required to review the part of the Corporate Governance This report, including the opinions, has been prepared for and
Statement relating to the Companys compliance with nine only for the Companys members as a body in accordance with
provisions of the UK Corporate Governance Code (the Code) Section 193 of the Companies Act, 1990 and for no other
and the two provisions of the Irish Corporate Governance Annex purpose. We do not, in giving these opinions, accept or assume
specified for our review. We have nothing to report having responsibility for any other purpose or to any other person to
performed our review. whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.

Financial Statements
On page 101 of the Annual Report, as required by the Code
Provision C.1.1, the Directors state that they consider the Annual
Report taken as a whole to be fair, balanced and understandable Martin Freyne
and provides the information necessary for members to assess for and on behalf of PricewaterhouseCoopers
the Groups performance, business model and strategy. On page Chartered Accountants and Statutory Audit Firm
63, as required by C3.8 of the Code, the Audit Committee has Ballycar House
set out the significant issues that it considered in relation to the Newtown
Financial Statements, and how they were addressed. Under ISAs Waterford
(UK & Ireland) we are required to report to you if, in our opinion:
11 March 2014
the statement given by the Directors is materially inconsistent
with our knowledge of the Group acquired in the course of
performing our audit; or
the section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.

We have no exceptions to report arising from this responsibility.

Other information in the Annual Report


Under ISAs (UK & Ireland), we are required to report to you if, in
our opinion, information in the Annual Report is:

materially inconsistent with the information in the audited


Financial Statements; or
apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group and Company
acquired in the course of performing our audit; or
is otherwise misleading.

We have no exceptions to report arising from this responsibility.

107
www.glanbia.com
Financial Statements

Group income statement


for the financial year ended 04 January 2014

Pre- Pre-
exceptional Exceptional Total exceptional Exceptional Total
2013 2013 2013 2012* 2012* 2012*
000 000 000 000 000 000
Notes (note 7) (note 7)
Continuing operations
Revenue 5 2,382,133 2,382,133 2,211,757 2,211,757

Earnings before interest, tax and


amortisation (EBITA) 187,665 5,804 193,469 176,730 1,610 178,340
Intangible asset amortisation 6 (21,011) (21,011) (19,864) (19,864)

Operating profit 166,654 5,804 172,458 156,866 1,610 158,476

Finance income 10 2,168 2,168 2,942 2,942


Finance costs 10 (25,110) (25,110) (23,370) (23,370)
Share of results of Joint Ventures & Associates 26,488 26,488 12,147 12,147

Profit before taxation 170,200 5,804 176,004 148,585 1,610 150,195


Income taxes 11 (24,692) (316) (25,008) (25,611) 1,440 (24,171)
Profit for the year from continuing
operations 145,508 5,488 150,996 122,974 3,050 126,024

Discontinued operations
Profit for the year from discontinued
operations, net of tax 7 27,133 (7,761) 19,372

Profit for the year 145,508 5,488 150,996 150,107 (4,711) 145,396

Attributable to:
Equity holders of the Parent 150,330 144,956
Non-controlling interests 25 666 440
150,996 145,396

Earnings per share from continuing and discontinued operations attributable to the equity holders of the Parent
Basic earnings per share (cents) 12
From continuing operations 51.01 42.71
From discontinued operations 6.59
51.01 49.30

Diluted earnings per share (cents) 12


From continuing operations 50.66 42.33
From discontinued operations 6.53
50.66 48.86

*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

On behalf of the Board


L Herlihy S Talbot M Garvey
Directors

108 Glanbia plc 2013 Annual Report and Accounts


Group statement of comprehensive income

STRATEGIC REPORT
for the financial year ended 04 January 2014

2013 2012*
Notes 000 000
Profit for the year 150,996 145,396

Other comprehensive income/(expense)

DETAILED BUSINESS REVIEW


Items that are not reclassified subsequently to the Group income statement:
Remeasurements defined benefit schemes 28 (1,546) (100,095)
Deferred tax (charge)/credit on remeasurements 27 (166) 10,801
Share of remeasurements Joint Ventures & Associates 24 (1,149) (1,227)
Deferred tax credit on remeasurements Joint Ventures & Associates 24 220 169

Items that may be reclassified subsequently to the Group income statement:


Currency translation differences 22 (24,592) (8,071)
Net investment hedge 22 2,472 1,409

gOVERNANCE
Revaluation of available for sale financial assets 22 1,425 (971)
Fair value movements on cash flow hedges 22 898 3,445
Deferred tax on cash flow hedges and revaluation of available for sale financial assets 27 (541) (172)
Other comprehensive (expense) for the year, net of tax (22,979) (94,712)

Total comprehensive income for the year 128,017 50,684

Financial Statements
Total comprehensive income attributable to:
Equity holders of the Parent 127,351 50,244
Non-controlling interests 25 666 440

Total comprehensive income for the year 128,017 50,684

*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

www.glanbia.com 109
Financial Statements

Group statement of changes in equity


for the financial year ended 04 January 2014

Attributable to equity holders of the Parent


Share
capital and Non-
share Other Retained controlling
premium reserves earnings* Total interests Total
000 000 000 000 000 000
(note 23) (note 22) (note 24) (note 25)
Balance at 31 December 2011 100,962 153,544 261,308 515,814 7,135 522,949

Profit for the year 144,956 144,956 440 145,396

Other comprehensive income/(expense)


Remeasurements defined benefit schemes (100,095) (100,095) (100,095)
Deferred tax on remeasurements 10,801 10,801 10,801
Share of remeasurements Joint Ventures & Associates (1,058) (1,058) (1,058)
Fair value movements 2,474 2,474 2,474
Deferred tax on fair value movements (172) (172) (172)
Currency translation differences (8,071) (8,071) (8,071)
Net investment hedge 1,409 1,409 1,409

Total comprehensive (expense)/income for the year (4,360) 54,604 50,244 440 50,684

Dividends paid during the year (25,327) (25,327) (300) (25,627)


Cost of share based payments 3,209 3,209 3,209
Transfer on exercise, vesting or expiry of share based
payments 588 (588)
Shares issued 25 25 25
Premium on shares issued 1,108 1,108 1,108
Purchase of own shares (7,692) (7,692) (7,692)

Balance at 29 December 2012 102,095 145,289 289,997 537,381 7,275 544,656

Profit for the year 150,330 150,330 666 150,996

Other comprehensive income/(expense)


Remeasurements defined benefit schemes (1,546) (1,546) (1,546)
Deferred tax on remeasurements (166) (166) (166)
Share of remeasurements Joint Ventures & Associates (929) (929) (929)
Fair value movements 2,323 2,323 2,323
Deferred tax on fair value movements (541) (541) (541)
Currency translation differences (24,592) (24,592) (24,592)
Net investment hedge 2,472 2,472 2,472

Total comprehensive (expense)/income for the year (20,338) 147,689 127,351 666 128,017

Dividends paid during the year (27,929) (27,929) (307) (28,236)


Cost of share based payments 4,568 4,568 4,568
Transfer on exercise, vesting or expiry of share based
payments 4,468 (4,468)
Shares issued 41 41 41
Premium on shares issued 1,861 1,861 1,861
Purchase of own shares (7,387) (7,387) (7,387)

Balance at 04 January 2014 103,997 126,600 405,289 635,886 7,634 643,520

*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

110 Glanbia plc 2013 Annual Report and Accounts


Group BALANCE SHEET

STRATEGIC REPORT
as at 04 January 2014

2013 2012
Notes 000 000
ASSETS
Non-current assets
Property, plant and equipment 14 373,972 309,496

DETAILED BUSINESS REVIEW


Intangible assets 15 454,486 473,016
Investments in associates 16 80,492 67,586
Investments in joint ventures 17 62,894 58,482
Trade and other receivables 19 9,376 16,835
Deferred tax assets 27 22,464 19,963
Available for sale financial assets 18 9,498 9,144
1,013,182 954,522
Current assets
Inventories 20 314,481 282,028

gOVERNANCE
Trade and other receivables 19 257,216 271,589
Derivative financial instruments 32 1,750 1,457
Cash and cash equivalents 21 106,259 275,572
679,706 830,646

Total assets 1,692,888 1,785,168

Financial Statements
EQUITY
Issued capital and reserves attributable to equity holders of the Parent
Share capital and share premium 23 103,997 102,095
Other reserves 22 126,600 145,289
Retained earnings 24 405,289 289,997
635,886 537,381

Non-controlling interests 25 7,634 7,275

Total equity 643,520 544,656

LIABILITIES
Non-current liabilities
Borrowings 26 441,641 527,046
Deferred tax liabilities 27 95,584 91,057
Retirement benefit obligations 28 78,035 98,133
Provisions for other liabilities and charges 29 18,492 22,013
Capital grants 30 2,471 2,636
636,223 740,885
Current liabilities
Trade and other payables 31 344,642 345,423
Current tax liabilities 1,415 7,430
Borrowings 26 39,062 125,086
Derivative financial instruments 32 1,725 938
Provisions for other liabilities and charges 29 26,301 20,750
413,145 499,627

Total liabilities 1,049,368 1,240,512

Total equity and liabilities 1,692,888 1,785,168

On behalf of the Board


L Herlihy S Talbot M Garvey
Directors

www.glanbia.com 111
Financial Statements

Group statement of cash flows


for the financial year ended 04 January 2014

2013 2012
Notes 000 000
Cash flows from operating activities
Cash generated from operating activities 35 163,493 128,817
Interest received 2,253 2,814
Interest paid (26,409) (24,240)
Tax paid (31,600) (26,688)
Interest and tax paid - discontinued operations (7,657)
Net cash inflow from operating activities 107,737 73,046

Cash flows from investing activities


Acquisition of subsidiary, net of cash acquired (45,365)
Disposal of undertaking and investment in associate 25,599
Repayment of intercompany balance 125,652
Insurance proceeds 7,670 8,132
Disposal of Yoplait franchise 18,000
Payment of deferred consideration on acquisition of subsidiaries (1,104)
Purchase of property, plant and equipment (94,897) (65,893)
Purchase of intangible assets (11,543) (4,119)
Dividends received from joint ventures 17 10,937 13,778
Loans repaid/(advanced) to joint ventures and associates 7,178 (3,275)
Decrease in available for sale financial assets 1,752 523
Proceeds from sale of property, plant and equipment 780 495
Investing cash flows from discontinued operations 7 (23,964)
Net cash (outflow)/inflow from investing activities (78,123) 48,459

Cash flows from financing activities


Proceeds from issue of ordinary shares 23 1,902 1,133
Purchase of own shares 22 (7,387) (7,692)
(Decrease) in borrowings (162,921) (44,646)
Dividends paid to Company shareholders 13 (27,929) (25,327)
Dividends paid to non-controlling interests 25 (307) (300)
Capital grants received 1,584
Financing cash flows from discontinued operations 7 (928)
Net cash (outflow) from financing activities (196,642) (76,176)

Net (decrease)/increase in cash and cash equivalents (167,028) 45,329


Cash and cash equivalents at the beginning of the year 275,572 231,373
Effects of exchange rate changes on cash and cash equivalents (2,285) (1,130)

Cash and cash equivalents at the end of the year 21 106,259 275,572

2013 2012
Reconciliation of net cash flow to movement in net debt 000 000
Net (decrease)/increase in cash and cash equivalents (167,028) 45,329
Cash movements from debt financing 162,921 47,869
(4,107) 93,198
Fair value movement of currency and interest rate swaps 674 2,850
Exchange translation adjustment on net debt 5,549 7,723
Movement in net debt in the year 2,116 103,771
Net debt at the beginning of the year (376,560) (480,331)

Net debt at the end of the year (374,444) (376,560)

Net debt comprises:


Borrowings 26 (480,703) (652,132)
Cash and cash equivalents 21 106,259 275,572

(374,444) (376,560)

112 Glanbia plc 2013 Annual Report and Accounts


Company BALANCE SHEET

STRATEGIC REPORT
as at 04 January 2014

2013 2012
Notes 000 000
ASSETS
Non-current assets
Investments in associates 16 22,876 22,876

DETAILED BUSINESS REVIEW


Investments 18 609,954 611,661
632,830 634,537
Current assets
Trade and other receivables 19 209 632
209 632

Total assets 633,039 635,169

EQUITY

gOVERNANCE
Issued capital and reserves attributable to equity holders of the Company
Share capital and share premium 23 459,265 457,363
Retained earnings 24 65,170 107,795
Other reserves 4,350 2,701

Total equity 528,785 567,859

Financial Statements
LIABILITIES
Current liabilities
Trade and other payables 31 102,021 64,554
Bank overdraft 26 2,233 2,756
Total liabilities 104,254 67,310

Total equity and liabilities 633,039 635,169

As permitted by section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies (Amendment) Act, 1986, the Parent
Company is availing of the exemption from presenting its separate income statement in these Financial Statements and from filing it with
the Registrar of Companies. The loss for the year dealt with in the Financial Statements of the Company amounts to 10.2 million
(2012: profit 55.9 million).

On behalf of the Board


L Herlihy S Talbot M Garvey
Directors

www.glanbia.com 113
Financial Statements

Company statement of changes in equity


for the financial year ended 04 January 2014

Other reserves
Share Share
capital and based
share Retained Capital Own payment
premium earnings reserve shares reserve Total
000 000 000 000 000 000
(note 23) (note 24) (note 22 a) (note 22 f) (note 22 g)
Balance at 31 December 2011 456,230 77,807 4,227 (2,774) 5,143 540,633

Profit for the year 55,903 55,903

Dividends paid during the year (25,327) (25,327)


Cost of share based payments 3,209 3,209
Transfer on exercise, vesting or expiry of share based
(588) 2,245 (1,657)
payments
Shares issued 25 25
Premium on shares issued 1,108 1,108
Purchase of own shares (7,692) (7,692)

Balance at 29 December 2012 457,363 107,795 4,227 (8,221) 6,695 567,859

Loss for the year (10,228) (10,228)

Dividends paid during the year (27,929) (27,929)


Cost of share based payments 4,568 4,568
Transfer on exercise, vesting or expiry of share based
(4,468) 7,417 (2,949)
payments
Shares issued 41 41
Premium on shares issued 1,861 1,861
Purchase of own shares (7,387) (7,387)

Balance at 04 January 2014 459,265 65,170 4,227 (8,191) 8,314 528,785

114 Glanbia plc 2013 Annual Report and Accounts


Company statement of comprehensive income and statement of cash flows

STRATEGIC REPORT
for the financial year ended 04 January 2014

Company statement of comprehensive income 2013 2012


Notes 000 000
(Loss)/profit for the year 24 (10,228) 55,903

Total comprehensive (expense)/income for the year (10,228) 55,903

DETAILED BUSINESS REVIEW


Company statement of cash flows 2013 2012
Notes 000 000
Cash flows from operating activities
Cash generated from operating activities 35 33,370 56,803
Net cash inflow from operating activities 33,370 56,803

Cash flows from investing activities

gOVERNANCE
Disposal of subsidiary 19,021
Purchase of other Group companies (2,083) (51,974)
Disposal of other Group companies 3,165
Purchase of investments (515)
Net cash inflow/(outflow) from investing activities 567 (32,953)

Financial Statements
Cash flows from financing activities
Proceeds from issue of ordinary shares 23 1,902 1,133
Dividends paid to Company shareholders 13 (27,929) (25,327)
Purchase of own shares 22 (7,387) (7,692)
Net cash (outflow) from financing activities (33,414) (31,886)

Net increase/(decrease) in cash and cash equivalents 523 (8,036)

(Bank overdraft)/cash and cash equivalents at the beginning of the year (2,756) 5,280

(Bank overdraft) at the end of the year (2,233) (2,756)

www.glanbia.com 115
Financial Statements

Notes to the Financial Statements


for the financial year ended 04 January 2014

1. General information requires the use of estimates, judgements non-controlling interest's proportionate
and assumptions that affect the reported share of the acquiree's net assets. The
Glanbia plc (the Company) and its amounts of assets and liabilities at the date excess of the consideration transferred,
subsidiaries (together the Group) is a of the Financial Statements and the reported the amount of any non-controlling
global performance nutrition and ingredients amounts of revenues and expenses during interest in the acquiree and the
Group with its main operations in Europe, the reporting period. Although these acquisition-date fair value of any
USA, Middle East, Africa, Asia Pacific and estimates are based on managements best previous equity interest in the acquiree
Latin America. knowledge of the amount, event or actions, over the fair value of the Group's share
actual results ultimately may differ from of the identifiable net assets acquired is
The Company is a public limited company these estimates. Amounts are stated in euro recorded as goodwill. If this is less than
incorporated and domiciled in Ireland. The thousands (000) unless otherwise stated. the fair value of the net assets of the
address of its registered office is Glanbia These Financial Statements are prepared for subsidiary acquired in the case of a
House, Kilkenny, Ireland. The Group is a 53-week period ending on 04 January bargain purchase, the difference is
controlled by Glanbia Co-operative Society 2014, comparatives are for the 52-week recognised directly in the income
Limited (the Society). The Society can period ended 29 December 2012. The statement.
nominate up to 14 members of the board of balance sheets for 2013 and 2012 have
Directors of Glanbia plc for the years 2013 been drawn up as at 04 January 2014 and Discontinued operations and non-
to 2015 (inclusive) and currently holds, 29 December 2012 respectively. current assets held for sale are defined
together with its subsidiaries, 41.3% of the as follows: a component of an entity
issued share capital of the Company and is Going concern that either has been disposed of,
the ultimate parent of the Group. After making enquiries the Directors have a abandoned, or is classified as held for
reasonable expectation that the Group has sale and:
The Companys shares are quoted on the adequate resources to continue in
Irish and London Stock Exchanges. operational existence for the foreseeable n represents a separate major line of
future. The Group therefore continues to business or geographical area of
These consolidated Financial Statements adopt the going concern basis in preparing operation; or
have been approved for issue by the Board its consolidated Financial Statements.
of Directors on 11 March 2014. n is part of a single coordinated plan to
dispose of a separate major line of
(b) Consolidation
business or geographical area of
The Group Financial Statements
2. Summary of significant operation; or
incorporate:
accounting polices
(i) The Financial Statements of the n is a subsidiary acquired exclusively
New accounting standards and IFRIC Company and entities controlled by it with a view to resale.
interpretations adopted by the Group during (its subsidiaries). Control is achieved
Classification as a discontinued
the year ended 04 January 2014 are dealt where the Company has the power to
operation occurs upon disposal,
with in section (z) below. With the exception govern the financial and operating
abandonment, or when the operations
of IAS 19 (revised) the adoption of these policies of an entity so as to obtain
meet the criteria to be classified as held
standards and interpretations had no benefits from its activities.
for sale.
significant impact on the results or financial
position of the Group during the year. The Subsidiaries are consolidated from
Non-current assets and disposal
impact on the 2012 Financial Statements the date on which control is transferred
groups classified as held for sale are
following the adoption of IAS 19 (revised) is to the Group and are no longer
measured at the lower of the carrying
set out in section (z) below. consolidated from the date that
value and the fair value less costs to
control ceases.
sell. Non-current assets and disposal
The other principal accounting policies
groups are classified as held for sale if
adopted in the preparation of these The Group uses the acquisition method
their carrying amounts will be
Financial Statements are set out below. of accounting to account for business
recovered through a sale transaction
These policies have been consistently combinations. The consideration
rather than continued use. This
applied to all years presented, unless transferred for the acquisition of a
condition is regarded as satisfied only
otherwise stated. subsidiary is the sum of the fair values of
when the sale is highly probable and
the assets transferred, the liabilities
the asset or disposal group is available
(a) Basis of preparation incurred and the equity interests issued
for immediate sale in its present
These consolidated Financial Statements by the Group. The consideration
condition. Management must be
have been prepared in accordance with EU transferred includes the fair value of any
committed to the sale, which should be
adopted International Financial Reporting asset or liability resulting from a
expected to qualify for recognition as a
Standards (IFRS), IFRIC interpretations and contingent consideration arrangement.
completed sale within one year of the
those parts of the Companies Acts, 1963 to Acquisition-related costs are expensed
date of classification. Property, plant
2013 applicable to companies reporting as incurred. Identifiable assets acquired
and equipment and intangible assets,
under IFRS. The consolidated Financial and liabilities and contingent liabilities
once classified as held for sale are not
Statements have been prepared under the assumed in a business combination are
depreciated or amortised.
historical cost convention as modified by use measured initially at their fair values at
of fair values for available for sale financial the acquisition date. On an acquisition-
When the Group ceases to have
assets, share based payments and derivative by-acquisition basis, the Group
control, any retained interest in the
financial instruments. The preparation of the recognises any non-controlling interest in
entity is re-measured to its fair value at
Financial Statements in conformity with IFRS the acquiree either at fair value or at the

116 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
the date when control is lost, with the equals or exceeds its interest in the cumulative currency translation
change in carrying amount recognised associate or joint venture, the Group recognised in the currency reserve is
in profit or loss. The fair value is the does not recognise further losses, not recycled through the income
initial carrying amount for the purposes unless the Group has incurred statement. Translation differences on
of subsequently accounting for the obligations or made payments on non-monetary financial assets and

DETAILED BUSINESS REVIEW


retained interest as an associate, joint behalf of the associate or joint venture. liabilities held at fair value through profit
venture or financial asset. In addition, or loss are recognised in the income
any movements previously recognised (c) Segment reporting statement as part of the fair value gain
in other comprehensive income in In accordance with the requirements of IFRS or loss.
respect of that entity are accounted for 8 Operating Segments, segments are
as if the Group had directly disposed of reported in a manner consistent with the (iii) Group companies
the related assets or liabilities. This may internal reporting provided to the Chief The income statement and balance
mean that amounts previously Operating Decision Maker. The Chief sheet of Group companies that have a
recognised in other comprehensive Operating Decision Maker responsible for functional currency different from the
income are reclassified to profit or loss. allocating resources and assessing presentation currency are translated
performance of the operating segments has into the presentation currency as

gOVERNANCE
Inter-company transactions, balances been identified as the Group Operating follows:
and unrealised gains on transactions Executive Committee.
between Group companies are n assets and liabilities at each
eliminated. Where necessary, the (d) Foreign currency translation reporting date are translated at the
accounting policies for subsidiaries (i) Functional and presentation closing rate at the reporting date of
have been changed to ensure currency the balance sheet; and
consistency with the policies adopted Items included in the Financial

Financial Statements
n income and expenses in the income
by the Group. Statements of each of the Groups
statement are translated at average
entities are measured using the
exchange rates for the year, or for
(ii) Investments in subsidiaries are currency of the primary economic
the period since acquisition, if
accounted for at cost less impairment. environment in which the entity
appropriate.
Cost is adjusted to reflect changes in operates (the functional currency).
consideration arising from contingent The consolidated Financial Statements
consideration amendments. Cost also Resulting exchange differences are
are presented in euro, which is the
includes directly attributable costs of taken to a separate currency reserve
Companys functional and the Groups
investment. within equity. When a foreign entity is
presentation currency.
sold outside the Group, such exchange
(iii) The Groups share of the results and differences are recognised in the income
net assets of associated companies (ii) Transactions and balances
statement as part of the gain or loss
and joint ventures is included based on Foreign currency transactions are
on sale.
the equity method of accounting. An translated into the functional currency
associate is an entity over which the using the exchange rates prevailing at
Goodwill and fair value adjustments
Group has significant influence, but not the date of the transactions. Foreign
arising on the acquisition of a foreign
control, through participation in the exchange gains and losses resulting
entity are treated as local currency
financial and operating policy decisions from the settlement of such
assets and liabilities of the foreign entity
of the investee. A joint venture is an transactions are recognised in the
and are translated at the exchange rate
entity subject to joint control by the income statement, except when
at the end of the reporting period.
Group and other parties. Under the deferred in equity as qualifying cash
equity method of accounting, the flow hedges. Monetary assets and
The Group uses the direct method of
Groups share of the post-acquisition liabilities denominated in foreign
consolidation for revaluation of the net
profits and losses of associates and currencies are retranslated at the rate
investments in foreign operations
joint ventures is recognised in the of exchange ruling at the reporting
where the Financial Statements of the
income statement and its share of post date. Currency translation differences
foreign operation are translated directly
acquisition movements in reserves is on monetary assets and liabilities are
into the functional currency of the
recognised directly in other taken to the income statement, except
ultimate parent.
comprehensive income. The cumulative when deferred in equity in the currency
post acquisition movements are translation reserve as (i) qualifying cash
(e) Property, plant and equipment
adjusted against the cost of the flow hedges or (ii) exchange gains or
Property, plant and equipment is stated at
investment. Unrealised gains on losses on long-term intra-group loans
cost or deemed cost less subsequent
transactions between the Group and its and on foreign currency borrowings
depreciation less any impairment loss.
associates and joint ventures are used to finance or provide a hedge
Historic cost includes expenditure that is
eliminated to the extent of the Groups against Group equity investments in
directly attributable to the acquisition of the
interest in the associate or joint venture. non-euro denominated operations to
assets. Cost may also include transfers from
Unrealised losses are also eliminated the extent that they are neither
equity of any gains/losses on qualifying cash
unless the transaction provides planned nor expected to be repaid in
flow hedges of foreign currency purchases of
evidence of an impairment of the asset the foreseeable future or are expected
property, plant and equipment.
transferred. When the Groups share of to provide an effective hedge of the net
losses in an associate or joint venture investment. When long-term intra-
group loans are repaid the related

www.glanbia.com 117
Financial Statements

Certain items of property, plant and Goodwill associated with the developing computer software
equipment that had been revalued prior acquisition of associates or joint programmes, if they meet the
to the date of transition to IFRS (4 January ventures is included within the recognition criteria of IAS 38
2004) are measured on the basis of investment in associates or joint Intangible Assets. Computer software
deemed cost, being the revalued amount ventures. costs recognised as assets are written
depreciated to date of transition. Items of off over their estimated useful lives,
property, plant and equipment that were Goodwill is carried at cost less which is normally between five and
fair valued at date of transition are also accumulated impairment losses, ten years.
measured at deemed cost, being the fair if applicable. Goodwill is tested for
value at date of transition. impairment on an annual basis. (g) Available for sale financial assets
Goodwill impairments are not reversed. Available for sale financial assets are non-
Depreciation is calculated on the straight- derivatives that are either designated in this
line method to write off the cost of each In accordance with IFRS 1 - First time category or not classified in any of the other
asset over its estimated useful life at the adoption of International Financial categories. They are included in non-current
following rates: Reporting Standards, goodwill written assets unless management intends to
% off to reserves prior to date of transition dispose of the available for sale financial
Land Nil to IFRS remains written off. In respect asset within 12 months of the reporting
Buildings 2.5 5 of goodwill capitalised and amortised date. They are initially recognised at fair
Plant and equipment 4 33 at transition date, its carrying value at value plus transaction costs and are
Motor vehicles 20 25 date of transition to IFRS remains subsequently adjusted to fair value at each
unchanged. Goodwill is allocated to reporting date. Unrealised gains and losses
The assets residual values and useful lives cash generating units for the purpose arising from changes in the fair value of the
are reviewed, and adjusted if appropriate, at of impairment testing. The allocation is available for sale financial assets are
each reporting date. made to those cash generating units or recognised in other comprehensive income.
groups of cash generating units that When such available for sale assets are sold
Assets held under finance leases are are expected to benefit from the or impaired, the accumulated fair value
depreciated over their expected useful lives business combination in which the adjustments are included in the income
on the same basis as owned assets or, goodwill arose. statement as gains or losses from available
where shorter, the term of the relevant lease. for sale financial assets. The fair values of
(ii) Research and development costs quoted financial assets are based on current
Property, plant and equipment is tested for Research expenditure is recognised as bid prices. If the market for a financial asset is
impairment when indicators arise. Where the an expense as incurred. Costs incurred not active the Group establishes fair value
carrying amount of an asset is greater than on development projects (relating to using valuation techniques. Where the range
its estimated recoverable amount, it is the design and testing of new or of reasonable fair values is significant and the
written down immediately to its recoverable improved products) are recognised as probability of various estimates cannot be
amount. Gains and losses on disposals are intangible assets when it is probable reasonably assessed, the Group measures
determined by comparing proceeds with the that the project will be a success, the investment at cost.
carrying amount and are included in the considering its commercial and
income statement. technological feasibility, and costs can Investments in subsidiaries held by the
be measured reliably. Development Company are carried at cost.
Repairs and maintenance expenditure is costs are amortised using the straight
charged to the income statement during the line method over their estimated useful Impairment losses recognised in the income
financial period in which it is incurred. The lives, which is normally six years. statement on equity instruments are not
cost of major renovations is included in the reversed through the income statement.
carrying amount of the asset when it is (iii) Brands/know-how, customer
probable that future economic benefits in relationships and other intangibles (h) Leases
excess of the originally assessed standard of Expenditure to acquire brands/know- A lease of assets where the Group has
performance of the existing asset will flow to how, customer relationships and other substantially all the risks and rewards of
the Group. Major renovations are depreciated intangibles is capitalised and amortised ownership are classified as finance leases.
over the remaining useful life of the related using the straight-line method over its A determination is also made as to whether
asset. useful life, which is set out in note 15 - the substance of an arrangement could
Intangible Assets. Indefinite life equate to a finance lease, considering
(f) Intangible assets intangible assets are those for which whether fulfilment of the arrangement is
(i) Goodwill there is no foreseeable limit to their dependent upon the use of a specific asset
Goodwill represents the excess of the expected useful life. Indefinite life and the arrangement contains the right to
cost of an acquisition over the fair value intangible assets are carried at cost use an asset. If the specified criteria are
of the Groups share of the net less accumulated impairment losses, met, the arrangement is classified as a
identifiable assets of the acquired if applicable, and are not amortised finance lease. Finance leases are
subsidiary, associate or joint venture at on an annual basis. capitalised at the inception of the lease at
the date of acquisition. the lower of the fair value of the leased
(iv) Computer software asset or the present value of the minimum
Goodwill on acquisitions of subsidiaries Costs incurred on the acquisition of lease payments. Each lease payment is
is included in intangible assets. computer software are capitalised, as allocated between the liability and finance
are costs directly associated with charges so as to achieve a constant rate on
the finance balance outstanding.

118 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
The corresponding rental obligation, net of difference between the assets carrying time of the transaction affects neither
finance charges is included in borrowings value and the estimated future cash flows. accounting nor taxable profit or loss.
and split between current and non-current, The carrying amount of the asset is reduced Deferred tax is determined using
as appropriate. The interest element of the through the use of a provision account and tax rates and laws enacted or
finance cost is charged to the income the amount of the loss is recognised in the substantively enacted by the

DETAILED BUSINESS REVIEW


statement over the lease period. The income statement. When a receivable is reporting date.
property, plant and equipment acquired uncollectable, it is written off against the
under finance leases is depreciated over the provision account for receivables. Deferred tax assets are recognised to
shorter of the useful life of the asset or the Subsequent recoveries of amounts the extent that it is probable that future
lease term. previously written off are credited to the taxable profit will be available against
income statement. Where risks associated which the temporary differences can
Leases where a significant portion of the risks with receivables are transferred out of the be utilised.
and rewards of ownership are retained by the Group under debt purchase agreements,
lessor are classified as operating leases. such receivables are recognised in the Deferred tax is provided on
Payments made under operating leases (net balance sheet to the extent of the Groups temporary differences arising on
of any incentives received from the lessor) are continued involvement and retained risk. investments in subsidiaries,

gOVERNANCE
charged to the income statement on a associates and joint ventures, except
straight-line basis over the period of the lease. (k) Cash and cash equivalents where the timing of the reversal of the
Cash and cash equivalents comprise cash temporary difference can be
(i) Inventories on hand, deposits held on call with banks, controlled by the Group and it is
Inventories are stated at the lower of cost or other short-term highly liquid investments probable that the temporary
net realisable value. Cost is determined by with original maturities of three months or difference will not reverse in the
the first-in, first-out (FIFO) method. The less and bank overdrafts. In the balance foreseeable future.

Financial Statements
cost of finished goods and work in progress sheet, bank overdrafts (if applicable) are
comprises raw materials, direct labour, included in borrowings in current liabilities. (m) Employee benefits
other direct costs and related production (i) Pension obligations
overheads (based on normal capacity). Net (l) Income taxes Group companies operate various
realisable value is the estimated selling price The tax expense for the period comprises pension schemes. The schemes are
in the ordinary course of business, less the current and deferred tax. Tax is recognised generally funded through payments to
estimated costs of completion and the costs in the income statement except to the insurance companies or trustee-
of selling expenses. Costs of inventories extent that it relates to items recognised in administered funds, determined by
include the transfer from equity of any other comprehensive income or directly in periodic actuarial calculations.
gains/losses on qualifying cash flow hedges equity, in which case the tax is also The Group has both defined benefit and
which relate to purchases of raw materials. recognised in other comprehensive income defined contribution plans.
or directly in equity respectively.
(j) Trade and loan receivables A defined contribution plan is a pension
Trade receivables are recognised initially at (i) Current tax plan under which the Group pays fixed
fair value and subsequently measured at Current tax is calculated on the contributions into a separate entity.
amortised cost using the effective interest basis of tax laws enacted or The Group has no legal or constructive
method less provision for impairment. substantially enacted at the Group obligations to pay further contributions if
balance sheet date in countries the fund does not hold sufficient assets
Loan receivables are initially recognised at where the Group operates and to pay all employees the benefits
fair value and subsequently measured at generates taxable income, taking relating to employee service in the
amortised cost using the effective interest into account adjustments relating to current and prior periods. The
method, less provision for impairment. prior years. Management periodically contributions are recognised as
These are classified as non-current assets, evaluates positions taken in tax returns employee benefit expense when they
except for those maturing within 12 months with respect to situations in which are due.
of the reporting date. applicable tax legislation is subject to
interpretation and establishes A defined benefit plan is a pension plan
A provision for impairment of receivables is provision, where appropriate, on the that is not a defined contribution plan.
established when there is objective evidence basis of amounts expected to be paid Defined benefit plans define an amount
that the Group will not be able to collect all to the tax authorities. of pension benefit that an employee
amounts due according to the original terms will receive on retirement, usually
of the receivables. If collectability appears (ii) Deferred tax dependent on one or more factors
unlikely compared with the original terms of Deferred tax is provided in full, using such as age, years of service and
the receivable, the Group will determine the the liability method, on temporary compensation.
appropriate provision based on the available differences arising on the reporting date
evidence at that time. Significant financial between the tax bases of assets and The liability recognised in the balance
difficulties of the trade/loan receivable, liabilities and their carrying amounts in sheet in respect of defined benefit
probability that the trade/loan receivable will the Financial Statements. However, pension plans is the present value of the
enter bankruptcy or financial reorganisation, deferred tax is not accounted for if it defined benefit obligation at the
and default or delinquency in payments are arises from initial recognition of an reporting date less the fair value of the
considered indicators that the receivable is asset or liability in a transaction other plan assets. The defined benefit
impaired. The amount of the provision is the than a business combination that at the obligation is calculated annually by

www.glanbia.com 119
Financial Statements

independent actuaries using the The fair value of the instruments is included in non-current liabilities and are
projected unit credit method. The calculated using the binomial model. credited to the income statement on a
present value of the defined benefit straight-line basis over the expected lives of
obligation is determined by discounting Non-market vesting conditions are the related assets. Research and
the estimated future cash outflows included in assumptions about the development taxation credits are recognised
using interest rates of high-quality number of options that are expected at their fair value in the income statement
corporate bonds that are denominated to vest. The total expense is where there is reasonable assurance that
in the currency in which the benefits will recognised over the vesting period, the credit will be received.
be paid, and that have terms to maturity which is the period over which all of
approximating to the terms of the the specified vesting conditions are to (o) Revenue recognition
related pension obligation. be satisfied. At each reporting date, Revenue comprises the fair value of the
the Group revises its estimates of the consideration receivable for the sale of
Actuarial gains and losses arising from number of options that are expected goods and services to external customers
experience adjustments and changes to vest based on the non-market net of value added tax, rebates and
in actuarial assumptions are charged vesting conditions. It recognises the discounts. The Group recognises revenue
or credited to equity in other impact of the revision to original when the amount of revenue can be reliably
comprehensive income in the period in estimates, if any, in the income measured, when it is probable that future
which they arise. statement, with a corresponding economic benefit will flow to the entity and
adjustment to equity. When the when specific criteria have been met for
A curtailment arises when the Group is options are exercised, the Company each of the Groups activities. Revenue from
demonstrably committed to make a issues new shares. The proceeds the sale of goods is recognised when
significant reduction in the number of received net of any directly attributable significant risks and rewards of ownership of
employees covered by a plan. A past transaction costs are credited to share the goods are transferred to the buyer in the
service cost, negative or positive, arises capital (nominal value) and share ordinary course of the Groups business,
following a change in the present value premium when the options are which generally arises on delivery or in
of the defined benefit obligation for exercised. accordance with specific terms and
employee service in prior periods, conditions agreed with customers. The
resulting in the current period from the (iii) Awards under the 2008 Long Term timing of recognition of services revenue
introduction of, or changes to, post Incentive Plan equals the timing of when the services are
employment benefits. A settlement The fair value of shares awarded under rendered. Interest income is recognised
arises where the Group is relieved of the 2008 LTIP scheme are determined using the effective interest method.
responsibility for a pension obligation using a Monte Carlo simulation Dividends are recognised when the right to
and eliminates significant risk relating to technique. The LTIP contains inter alia receive payment is established. Revenue
the obligation and the assets used to a Total Shareholder Return (TSR) from the sale of property is recognised when
effect the settlement. Past-service based (and hence market-based) there is an unconditional and irrevocable
costs, negative or positive, are vesting condition and, accordingly, the contract for sale.
recognised immediately in the income fair value assigned to the related equity
statement. Losses arising on settlement instruments on initial application of (p) Impairment of assets
or curtailment not allowed for in the IFRS 2 is adjusted so as to reflect the (i) Financial assets
actuarial assumptions are measured at anticipated likelihood at the grant date The Group assesses at each reporting
the date on which the Group becomes of achieving the market-based vesting date whether there is objective
demonstrably committed to the condition. evidence that a financial asset or a
transaction. Gains arising on a group of financial assets is impaired. In
settlement or curtailment are measured (iv) Awards under the Annual Incentive the case of equity securities classified
at the date on which all parties whose Deferred Into Shares Scheme as available for sale, a significant or
consent is required are irrevocably The fair value of shares awarded is prolonged decline in the fair value of
committed to the transaction. determined in line with the Groups the security below its cost is
Curtailment and settlement gains and Annual Incentive Scheme rules. The considered an indicator that the
losses are dealt with in the income expense is recognised immediately in securities are impaired. If any such
statement. the income statement with a evidence exists for available for sale
corresponding entry to equity. financial assets, the cumulative loss is
(ii) Share based payments measured as the difference between
The Group operates a number of (n) Government grants the acquisition cost and the current fair
equity settled share based Grants from government authorities are value. Impairment losses recognised in
compensation plans which include recognised at their fair value where there is the income statement on equity
executive share option and share a reasonable assurance that the grant will instruments are not reversed through
award schemes. be received and the Group will comply with the income statement. Impairment
all attached conditions. Government grants testing of trade receivables is
The charge to the income statement in relating to costs are deferred and described in (j) above.
respect of share-based payments is recognised in the income statement over
based on the fair value of the equity the period necessary to match them with (ii) Non-financial assets
instruments granted and is spread over the costs they are intended to compensate. Assets that have an indefinite useful life
the vesting period of the instrument. Government grants relating to the purchase are not subject to amortisation and are
of property, plant and equipment are tested annually for impairment. Assets

120 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
which have a finite useful life are The fair value of foreign currency contracts risk. If the hedge no longer meets the
subject to amortisation and reviewed is estimated by discounting the difference criteria for hedge accounting, the
for impairment when events or between the contractual forward price and adjustment to the carrying amount of
changes in circumstance indicate that the current forward price for the residual a hedged item for which the effective
the carrying value may not be maturity of the contract using the European interest method is used is amortised

DETAILED BUSINESS REVIEW


recoverable. Goodwill is reviewed at Central Bank interest rate at the to the income statement.
least annually for impairment. An measurement date.
impairment loss is recognised to the (ii) Cash flow hedge
extent that the carrying value of the The fair value of interest rate swaps is based The effective portion of changes in the
assets exceeds their recoverable on discounting estimated future cash flows fair value of derivatives that are
amount. The recoverable amount is the based on the terms and maturity of each designated and qualify as cash flow
higher of the assets fair value less contract and using market interest rates for hedges is recognised in other
costs to sell and its value in use. a similar instrument at the measurement comprehensive income. The gain or
For the purposes of assessing date. The fair value of commodity contracts is loss relating to the ineffective portion is
impairment, assets are grouped at estimated by discounting the difference recognised immediately in the income
the lowest levels for which there are between the contracted futures price and the statement.

gOVERNANCE
separately identifiable cash flows (cash current forward price for the residual maturity
generating units). of the contracts using the European Central Amounts accumulated in equity are
Bank and US Federal Reserve interest rates. recycled in the income statement in the
(q) Share capital periods when the hedged item affects
Ordinary shares are classified as equity. The method of recognising the resulting gain profit or loss (for instance when the
Incremental costs directly attributable to the or loss depends on whether the derivative is forecast sale that is hedged takes
issue of new shares or options are shown in designated as a hedging instrument and, place). The recycled gain or loss

Financial Statements
equity as a deduction from the proceeds. if so, the nature of the item being hedged. relating to the effective portion of
The Group designates certain derivatives as interest rate swaps hedging variable
Own shares either: (1) hedges of the fair value of interest rates on borrowings is
The cost of own shares, held by an recognised assets or liabilities or a firm recognised in the income statement
Employee Share Trust in connection with commitment (fair value hedge); (2) hedges within finance costs. The recycled
the Companys Sharesave Scheme and the of a particular risk associated with a gain or loss relating to the effective
Annual Incentive Deferred into Shares, is recognised asset or liability or a highly portion of foreign exchange contracts
deducted from equity. Ordinary shares probable forecast transaction (cash is recognised in the income statement
purchased under the terms of the 2008 LTIP flow hedge). within revenue. However, when the
schemes and the Annual Incentive Deferred forecast transaction that is hedged
into Shares Scheme are accounted for as The Group documents at the inception of the results in the recognition of a non-
own shares and recorded as a deduction transaction the relationship between hedging financial asset (for example, inventory)
from equity. instruments and hedged items, as well as its or a non-financial liability, the gains and
risk management objective and strategy for losses previously deferred in equity are
(r) Dividends undertaking various hedge transactions. The transferred from equity and included in
Dividends to the Companys shareholders Group also documents its assessment, both the initial measurement of the cost of
are recognised as a liability of the Company at hedge inception and every six months, of the asset or liability.
when approved by the Companys whether the derivatives that are used in
shareholders. hedging transactions are highly effective in When a hedging instrument expires or
offsetting changes in fair values or cash flows is sold, or when a hedge no longer
(s) Derivative financial instruments of hedged items. meets the criteria for hedge
The activities of the Group expose it accounting, any cumulative gain or loss
primarily to the financial risks of changes in The fair values of various derivative existing in equity at that time remains in
foreign currency exchange rates, interest instruments used for hedging purposes are equity and is recognised when the
rates and commodity prices. The Group disclosed in note 32. Movements on the forecast transaction is ultimately
uses foreign currency, interest rate and hedging reserve are shown in note 22. The recognised in the income statement.
commodity derivative financial instruments full fair value of a hedging derivative is When a forecast transaction is no
to hedge these exposures. classified as a non-current asset or liability if longer expected to occur, the
the remaining maturity of the hedged item is cumulative gain or loss that was
The Group accounts for financial more than 12 months, and as a current reported in equity is immediately
instruments under IAS 32 (Amendment), asset or liability if the remaining maturity of transferred to the income statement.
Financial Instruments: Presentation, IAS 39 the hedged item is less than 12 months.
(Amendment), Financial Instruments: (iii) Derivatives that do not qualify
Recognition and Measurement and IFRS 7 (i) Fair value hedge for hedge accounting
Financial Instruments Disclosures. Changes in the fair value of Certain derivative instruments do not
Derivatives are initially recognised at fair derivatives that are designated and qualify for hedge accounting. Changes
value on the date a derivative contract is qualify as fair value hedges are in the fair value of any derivative
entered into and are subsequently recorded in the income statement, instruments that do not qualify for
remeasured at their fair value at the together with any changes in the fair hedge accounting are recognised in
reporting date. value of the hedged asset or liability the income statement.
that are attributable to the hedged

www.glanbia.com 121
Financial Statements

(iv) Financial guarantee contracts preference shares are recognised in the and the profit for the year from
Financial guarantee contracts are income statement as a finance cost. discontinued operations.
issued to banking institutions by the
Company on behalf of certain of its Borrowings are classified as current liabilities (z) New accounting standards
subsidiaries. These subsidiaries unless the Group has an unconditional right and IFRIC interpretations
engage in ongoing financing to defer settlement of the liability for at least The following standards and interpretations,
arrangements with these banking 12 months after the reporting date. issued by the IASB and the International
institutions. Under the terms of IAS 39 Financial Reporting Interpretations
Financial Instruments: Recognition (w) Provisions Committee (IFRIC), are effective for the
and Measurement, financial guarantee Provisions are recognised when the Group Group for the first time in the year ended 04
contracts are required to be has a constructive or legal obligation as a January 2014 and have been adopted by the
recognised at fair value at inception result of past events, when it is more likely Group:
and subsequently measured as a than not that an outflow of resources will be
provision under IAS 37 Provisions, required to settle the obligation and the n IAS 19 (revised), Employee Benefits
Contingent Liabilities and Contingent amount has been reliably estimated.
n IFRS 13, Fair Value Measurement
Assets on the company balance sheet. Provisions are measured at the present
value of the expenditures expected to be n IAS 1 (Amendment), Presentation of
Guarantees provided by the Company required to settle the obligation using a pre- Items of Other Comprehensive Income
over the payment of employer tax rate that reflects current market (OCI)
contributions in respect of the UK assessments of the time value of money
defined benefit pension schemes are and the risks specific to the obligation. The With the exception of IAS 19 (revised),
treated as insurance contracts. increase in provision due to passage of time adoption of the standards and the
is recognised as an interest expense. interpretations above had no significant
(t) Earnings per share impact on the results or financial position of
Earnings per share represents the profit (x) Termination benefits the Group during the year ended 04 January
in cents attributable to owners of the Termination benefits are payable when 2014.
Company, divided by the weighted employment is terminated by the Group
average number of ordinary shares in before the normal retirement date, or IAS 19 (revised) - Employee Benefits
issue during the period. whenever an employee accepts voluntary amends the accounting for employment
redundancy in exchange for these benefits. benefits. The Group has applied the
Adjusted earnings per share is calculated The Group recognises termination benefits standard retrospectively in accordance with
on the net profit attributable to the owners at the earlier of the following dates (a) when the transition provisions of the standard.
of the Company, before exceptional items the Group can no longer withdraw the offer
and intangible asset amortisation (net of of those benefits and (b) when the entity The standard replaces the interest cost on
related tax). recognises costs for a restructuring that is the defined benefit obligation and the
within the scope of IAS 37 and involves the expected return on plan assets with a net
Diluted earnings per share is calculated payment of termination benefits. interest cost which is calculated based on
by adjusting the weighted average the net defined benefit liability and the
number of ordinary shares outstanding (y) Income Statement format discount rate, measured at the beginning of
to assume conversion of all dilutive (i) Exceptional Items the year. There is no change to determining
potential ordinary shares. The Group has adopted an income the discount rate; this continues to reflect
statement format that seeks to the yield on high-quality corporate bonds. In
(u) Borrowing costs highlight significant items within the addition, the government pension levy is
In accordance with IAS 23 (Revised), Group results for the year. Such items now reclassified and recognised in other
Borrowing Costs, borrowing costs directly may include restructuring, impairment comprehensive income. As a result the
attributable to the acquisition, construction of assets, profit or loss on disposal or adoption of IAS 19 (revised) - Employee
or production of a qualifying asset are termination of operations, litigation Benefits has resulted in a decrease in the
capitalised. Other borrowing costs are settlements, legislative changes and income statement charge for the 12 months
expensed. profit or loss on disposal of ended 29 December 2012. This has no
investments. Judgement is used by effect on total comprehensive income as the
the Group in assessing the particular decreased charge in the income statement
(v) Borrowings
items, which by virtue of their scale is offset by an increase in the charge to the
Borrowings are recognised initially at fair
and nature, should be disclosed in statement of other comprehensive income.
value, net of transaction costs incurred.
Borrowings are subsequently stated at the income statement and notes as
amortised cost; any difference between exceptional items.
the proceeds (net of transaction costs)
and the redemption value is recognised (ii) Earnings before interest, tax and
in the income statement over the period amortisation (EBITA)
of the borrowings using the effective The Group believes that EBITA is a
interest method. relevant performance measure and has
therefore disclosed this amount in the
Preference shares, which are mandatorily Group income statement. EBITA is
redeemable on a specific date, are classified stated before considering the share of
as borrowings. The dividends on these results of joint ventures and associates

122 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
There is a new term remeasurements. Had the Group not adopted IAS 19 (revised) The effect of the change in accounting
This is made up of actuarial gains and - Employee Benefits, profit before tax for policy for the continuing Group on the
losses and the difference between actuarial the year ended 04 January 2014 would Group income statement, Group statement
investment returns and the return implied by have been 2.1 million higher and of comprehensive income, basic earnings
the net interest cost. Remeasurements are remeasurements recognised in the Group per share and adjusted earnings per share

DETAILED BUSINESS REVIEW


reflected in the statement of other statement of comprehensive income would at 29 December 2012 is as follows:
comprehensive income. have been 3.6 million. Basic and diluted
earnings per share would have been
The pension deficit, retirement benefit approximately 0.6 cents higher.
obligations as previously reported on the
balance sheet has not changed as a result
of the above.
IAS 19
As reported impact Restated
2012 2012 2012
'000 000 000

gOVERNANCE
Earnings before interest, tax and amortisation 175,842 888 176,730
Income taxes (25,500) (111) (25,611)
Profit for the year pre exceptional 122,197 777 122,974
Profit for the year from discontinued operations 26,744 389 27,133
Remeasurements - defined benefit schemes (98,763) (1,332) (100,095)
Deferred tax on remeasurements 10,635 166 10,801

Financial Statements
Basic earnings per share (cents per share) - from continuing operations 42.45 0.26 42.71
Adjusted earnings per share (cents per share) - from continuing operations 51.02 0.32 51.34

The change in accounting policy had no impact on the continuing Group net debt or balance sheet as at 29 December 2012.

www.glanbia.com 123
Financial Statements

The following standards, amendments IFRIC 21, Levies, (effective for IFRS 11, Joint Arrangements, (effective
and interpretations have been financial periods beginning on or after for financial periods beginning on or
published. The Group will apply the 01 January 2014). after 01 January 2013)
relevant standards from their effective This standard sets out the accounting for an This standard is still subject to EU
dates and is currently assessing their obligation to pay a levy that is not income endorsement. IFRS 11 eliminates the
impact on the Groups Financial tax. The interpretation addresses what the existing accounting policy choice of
Statements. The standards are obligating event is that gives rise to pay a proportionate consolidation for jointly
mandatory for future accounting levy and when a liability should be controlled entities. IFRS 11 makes equity
periods but are not yet effective recognised. The Group is not currently accounting mandatory for participants in
and have not been early adopted by subjected to significant levies so the impact joint ventures. Changes in definition also
the Group. on the Group is not material. mean that the types of joint arrangements
have been reduced from three to two: joint
Revision to IAS 27 Separate Financial operations and joint ventures.
IFRS 9, Financial Instruments, (effective
Statements (effective for financial periods
for financial periods beginning on or after
beginning on or after 01 January 2014) IFRS 12, Disclosure of interest in other
01 January 2015).
This revision introduces a standard which entities, (effective for financial periods
This standard is still subject to EU
now deals solely with separate Financial beginning on or after 01 January 2013)
endorsement. IFRS 9 is the first step in the
Statements. IFRS 10 Consolidated This standard is still subject to EU
process to replace IAS 39, Financial
Financial Statements replaces all of the endorsement. IFRS 12 sets out the required
Instruments: Recognition and Measurement.
guidance on control and consolidation in disclosures for entities reporting under IFRS
IFRS 9 introduces new requirements for
IAS 27. The existing guidance and 10 and IFRS 11. IFRS 12 requires entities to
classifying and measuring financial assets and
disclosure requirements in IAS 27 for disclose information about the nature, risks
is likely to affect the Groups accounting for
separate Financial Statements remains and financial effects associated with the
its financial assets. IFRS 9 replaces the
unchanged. entitys interest in subsidiaries, associates,
multiple classification models in IAS 39 with a
single model that has only two categories: joint arrangements and unconsolidated
Revision to IAS 28 Associates and Joint structured entities.
amortised cost and fair value. Classification
under IFRS 9 is driven by the entitys Ventures (effective for financial periods
business model for managing financial beginning on or after the 01 January 2014)
assets. IFRS 9 removes the requirement to The revised standard results in the
separate embedded derivatives from financial replacement of the disclosure requirements
asset hosts. IFRS 9 removes the cost currently found in IAS 28 with IFRS 11 Joint
exemption for unquoted equities. Arrangements. The revised IAS 28 standard
results in joint ventures and associates
Amendment to IAS 32 Financial being accounted for using the equity
Instruments: Presentation (effective for method of accounting.
financial periods beginning on or after
01 January 2014, retrospectively applied) IFRS 10, Consolidated Financial
The amendment does not change the Statements, (effective for financial periods
requirement to offset a financial asset and beginning on or after 01 January 2013)
financial liability in the balance sheet, except This standard is still subject to EU
that when the entity currently has a legally endorsement. IFRS 10 replaces all of the
enforceable right of set-off the amendment guidance on control and consolidation in
clarifies that the right of set-off must be IAS 12 and SIC 12. IFRS 10 changes the
available immediately and is not to be definition of control so that the same criteria
contingent on a future event. are applied to all entities to determine
control. The core principle that a
Amendments to IAS 36, Impairment of consolidated entity presents a parent and its
assets, on the recoverable amount subsidiaries as if they are a single entity
disclosures for non-financial assets. remains unchanged, as do the mechanics of
(effective for financial periods beginning consolidation. IAS 27 is renamed Separate
on or after 01 January 2014). Financial Statements and is now a standard
This amendment removes certain dealing solely with separate Financial
disclosures regarding the recoverable Statements.
amount of cash generating units (CGUs)
which had been included in IAS 36 by the
issue of IFRS 13.

124 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
3. Financial risk and accordingly exposed to foreign currency of its projected debt exposure on a floating
management translation risk. rate basis over any succeeding 12 month
period, with further minimum guidelines over
3.1 Financial risk factors The Group also has transactional currency succeeding 24 and 36 month periods.
The conduct of its ordinary business exposures that arise from sales or purchases

DETAILED BUSINESS REVIEW


operations necessitates the Group holding by an operating unit in currencies other than The Group, on a continuous basis, monitors
and issuing financial instruments and the units operating functional currency. the level of fixed rate cover dependent on
derivative financial instruments. The main Management has set up a policy to require prevailing fixed market rates, projected debt
risks arising from issuing, holding and Group companies to manage their foreign and market informed interest rate outlook.
managing these financial instruments exchange risk against their functional
typically include currency risk, interest rate currency. Group companies are required to Based on noted Group policies, the impact
risk, price risk, liquidity risk, cash flow risk hedge foreign exchange risk exposure of a 1% movement in market interest rates
and credit risk. The Groups approach is to through Group Treasury. would have resulted in a 1.6 million
centrally manage these risks against gain/loss during 2013 (2012: 1.7 million
comprehensive policy guidelines, which are Group Treasury monitors and manages gain/loss).
summarised below. these currency exposures on a continuous

gOVERNANCE
basis, using approved hedging strategies, Occasionally, the Group manages its cash
The Group does not engage in holding or (including net investment hedges) and flow interest rate risk by using floating to
issuing speculative financial instruments or appropriate currency derivative instruments. fixed interest rate swaps. Such interest rate
derivatives. The Group finances its swaps have the economic effect of
operations by a mixture of retained profits, At 04 January 2014 and 29 December 2012, converting borrowings from floating rates to
preference shares, medium-term committed if the euro had weakened/strengthened by fixed rates. Under these interest rate swaps,
borrowings and short-term uncommitted 5% against the US dollar with all other the Group agrees with other parties to

Financial Statements
borrowings. The Group borrows in the major variables held constant, post-tax profit for the exchange at specified intervals, the
global debt markets in a range of currencies year would not have been materially difference between fixed interest rate
at both fixed and floating rates of interest, impacted as a result of foreign exchange amounts and floating rate interest amounts
using derivatives where appropriate to gains/losses on translation of US dollar calculated by reference to the agreed
generate the desired effective currency denominated non-hedged trade receivables notional amounts.
profile and interest rate basis. and cash and cash equivalents.
Occasionally the Group enters into fixed to
Risk management, other than credit risk A weakening/strengthening of the euro floating interest rate swaps to hedge the fair
management, is carried out by a central against the US dollar by 5% as at 04 January value interest rate risk arising where it has
treasury department (Group Treasury) under 2014 would have resulted in a currency borrowed at fixed rates.
policies approved by the Board of Directors. translation gain/loss of approximately 31.9
Group Treasury identifies, evaluates and million (2012: 27.4 million), which would be (c) Price risk
hedges financial risks in close cooperation recognised directly in other comprehensive The Group is exposed to equity securities
with the Groups business units. income. price risk because of investments held by the
Group in listed and unlisted securities and
The Board provides written principles for (b) Interest rate risk classified on the Group balance sheet as
overall risk management, as well as written The Groups objective in relation to available for sale financial assets. Certain
policies covering specific areas, such as interest rate management is to minimise securities are carried at cost and therefore are
liquidity risk, foreign exchange risk, interest the impact of interest rate volatility on not exposed to price risk.
rate risk, credit risk, use of derivative financial interest costs in order to protect reported
instruments and non-derivative financial profitability. This is achieved by To manage its price risk arising from
instruments, and investment of excess determining a long-term strategy against a investments in listed equity securities, the
liquidity. number of policy guidelines, which focus Group does not maintain a significant
on (a) the amount of floating rate balance with any one entity. Diversification of
Market risk indebtedness anticipated over such a the portfolio must be done in accordance
(a) Currency risk period and (b) the consequent sensitivity with the limits set by the Group. The impact
Although the Group is based in Ireland with of interest costs to interest rate of a 5% increase or decrease in equity
the euro as the functional currency of movements on this indebtedness and the indexes across the eurozone countries
Glanbia plc, it has significant geographic resultant impact on reported profitability. would not have any material impact on
investment and operating exposures outside The Group borrows at both fixed and Group operating profit.
the eurozone, primarily in the USA. As a floating rates of interest and uses interest
result currency movements, particularly rate swaps to manage the Groups To manage its exposure to certain
movements in the US dollar/euro exchange resulting exposure to interest rate commodity markets the Group enters into
rate, can significantly affect the Groups euro fluctuations. commodity futures contracts.
balance sheet and income statement. The
Group actively seeks to manage these Borrowings issued at floating rates expose For further details regarding the Groups
currency exposures by financing currency the Group to cash flow interest rate risk. price risk see note 32 derivative financial
assets with equivalent currency borrowings, Borrowings issued at fixed rates expose the instruments.
leaving the residual net assets unhedged Group to fair value interest rate risk. Group
policy is to maintain no more than one third

www.glanbia.com 125
Financial Statements

(d) Liquidity and cash flow risk


The Groups objective is to maintain a
balance between the continuity of funding
and flexibility through the use of borrowings
with a range of maturities. In order to
preserve continuity of funding, the Groups
policy is that, at a minimum, committed
facilities should be available at all times to
meet the full extent of its anticipated finance
requirements, arising in the ordinary course
of business, during the succeeding 12
month period. This means that at any time
the lenders providing facilities in respect of
this finance requirement are required to give
at least 12 months notice of their intention to
seek repayment of such facilities. At the year
end, the Group had multi-currency
committed term facilities of 744.0 million
(2012: 753.5 million) of which 263.4
million (2012: 226.5 million) was undrawn.
The weighted average maturity of these
facilities is 4.9 years (2012: 6.0 years).

For further details regarding the Groups


borrowing facilities see note 26
borrowings.

(e) Credit risk


Credit risk is managed on a Group basis.
Credit risk arises from cash and cash
equivalents, derivative financial instruments
and deposits with banks and financial
institutions, as well as credit exposures to
customers, including outstanding receivables
and committed transactions. In the
international movement and placement of
funds and execution of financial transactions,
the Groups policies require exposure to
independently rated parties with credit
ratings of at least A3 (Moodys) or A-
(Standard & Poors). In the movement and
placement of funds, and execution of
financial transactions in Ireland, the Group is
exposed to independently rated parties with
credit ratings of at least Ba2 (Moodys) or BB
(Standard & Poors).

The Groups credit risk management policy


in relation to trade receivables involves
periodically assessing the financial reliability
of customers, taking into account their
financial position, past experience and other
factors. The utilisation of credit limits is
regularly monitored and where appropriate,
credit risk is covered by credit insurance and
by holding appropriate security or liens.

For further details regarding the Groups


credit risk see note 19 - trade and other
receivables.

126 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
The table below analyses the Groups financial liabilities, which will be settled on a net basis, into relevant maturity groupings based on
the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.

Financial liabilities Between Between

DETAILED BUSINESS REVIEW


Less than 1 and 2 2 and 5 More than
1 year years years 5 years Total
000 000 000 000 000
At 04 January 2014
Borrowings 39,062 203,266 238,375 480,703
Future finance costs 25,042 23,481 59,835 31,665 140,023
Derivative financial instruments 1,725 1,725
Trade and other payables 344,642 344,642
410,471 23,481 263,101 270,040 967,093
Less future finance costs (25,042) (23,481) (59,835) (31,665) (140,023)

gOVERNANCE
385,429 203,266 238,375 827,070

Between Between
Less than 1 and 2 2 and 5 More than
1 year years years 5 years Total
000 000 000 000 000
At 29 December 2012

Financial Statements
Borrowings 125,086 39,062 487,984 652,132
Future finance costs 28,754 25,445 71,680 46,063 171,942
Derivative financial instruments 938 938
Trade and other payables 345,423 345,423
500,201 64,507 71,680 534,047 1,170,435
Less future finance costs (28,754) (25,445) (71,680) (46,063) (171,942)

471,447 39,062 487,984 998,493

The Company has borrowings of 2.2 million at year end (2012: borrowings 2.8 million). The contractual undiscounted cash flows equal
the balance at 04 January 2014 and 29 December 2012.

The table below analyses the Groups foreign exchange contracts, which will be settled on a gross basis, into relevant maturity groupings
based on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.

Foreign exchange contracts Between Between


Less than 1 and 2 2 and 5 More than
1 year years years 5 years Total
000 000 000 000 000
At 04 January 2014
Foreign exchange contracts cash flow hedges
Inflow 19 19
Outflow (24) (24)

(5) (5)

Between Between
Less than 1 and 2 2 and 5 More than
1 year years years 5 years Total
000 000 000 000 000
At 29 December 2012
Foreign exchange contracts cash flow hedges
Inflow 9 9
Outflow (16) (16)

(7) (7)

www.glanbia.com 127
Financial Statements

3.2 Capital risk management 3.3 Fair value estimation The carrying value less impairment provision
The Groups objectives when managing The fair value of financial instruments traded of trade receivables and payables is
capital are to safeguard the Groups ability in active markets (such as available for sale assumed to approximate their fair values
to continue as a going concern in order to securities) is based on quoted market prices due to the short-term nature of trade
provide returns for shareholders and at 04 January 2014. The quoted market receivables and trade payables. The fair
benefits for other stakeholders and to price used for financial assets held by the value of financial liabilities for disclosure
maintain an optimal capital structure to Group is the current bid price. purposes is estimated by discounting the
reduce the cost of capital. Total capital future contractual cash flows at current
is calculated based on equity as shown The fair value of financial instruments that are market interest rates that are available to the
in the balance sheet and net debt not traded in an active market (for example, Group for similar financial instruments.
which amounted to 1,017.9 million over the counter derivatives) is determined by
(2012: 921.2 million). using valuation techniques. The Group uses a In accordance with IFRS 13 Fair Value
variety of methods and makes assumptions Measurements, the Group has disclosed the
In order to maintain or adjust the capital that are based on market conditions existing at fair value of instruments by the following fair
structure, the Group may adjust the amount each reporting date. Quoted market prices or value measurement hierarchy:
of dividends paid to shareholders, return dealer quotes for similar instruments are used
capital to shareholders, issue new shares or for long-term debt. Other techniques, such as n quoted prices (unadjusted) in active
sell assets to increase or reduce debt or buy estimated discounted cash flows, are used to markets for identical assets and liabilities
back shares. determine fair value for the remaining financial (level 1);
instruments. The fair value of interest rate
n inputs, other than quoted prices included
The Group monitors debt capital on the swaps is calculated as the present value of the
in level 1, that are observable for the
basis of interest cover and debt to EBITDA estimated future cash flows. The fair value of
asset and liability, either directly (that is,
ratios. At 04 January 2014, the Groups foreign exchange contracts is determined
as prices) or indirectly (that is, derived
debt/adjusted EBITDA ratio was 1.7 times using quoted forward exchange rates at 04
from prices) (level 2); and
(2012: 1.7 times), which is deemed by January 2014.
management to be prudent and in line with n inputs for the asset or liability that are not
industry norms. Adjusted EBITDA for the based on observable market data (that
purpose of financing ratios is Group EBITDA is, unobservable inputs) (level 3).
plus dividends received from Joint Ventures
& Associates.

The following table presents the Groups assets and liabilities, which are measured at fair value at 04 January 2014 and 29 December 2012:

At 04 January 2014 Level 1 Level 2 Level 3 Total


Notes 000 000 000 000
Assets
Derivatives used for hedging 32 1,750 1,750
Available for sale financial assets equity securities 18 307 1,789 2,096

Total assets 307 3,539 3,846

Liabilities
Derivatives used for hedging 32 (1,725) (1,725)

Total liabilities (1,725) (1,725)

At 29 December 2012 Level 1 Level 2 Level 3 Total


Notes 000 000 000 000
Assets
Derivatives used for hedging 32 1,457 1,457
Available for sale financial assets equity securities 18 224 447 671

Total assets 224 1,904 2,128

Liabilities
Derivatives used for hedging 32 (938) (938)

Total liabilities (938) (938)

128 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
Valuation techniques used to derive Groups valuation process Discussions of valuation processes
level 2 fair values The Groups finance department includes a and results are held between the Group
Level 2 derivatives comprise foreign team that performs the valuations of Finance Director and the Audit Committee.
exchange contracts and commodity futures. financial assets required for financial Changes in level 2 fair values are analysed
These foreign exchange contracts and reporting purposes, including level 3 fair at each reporting date. As part of this

DETAILED BUSINESS REVIEW


commodity futures have been fair valued values. The Group did not hold any level 3 discussion, the valuation team presents
using forward rates that are quoted in active financial assets at 04 January 2014 or 29 a report that explains the reasons for fair
markets. The effects of discounting are December 2012. This team reports directly value movements.
generally insignificant for level 2 derivatives. to the Group Finance Director who in turn
reports to the Audit Committee.

3.4 Offsetting financial assets and financial liabilities


(a) Financial assets
The following financial assets are subject to offsetting, enforceable master netting arrangements and similar agreements:

gOVERNANCE
At 04 January 2014
Gross amounts
of recognised Net amounts of
Gross amounts financial liabilities financial assets
of recognised set off in the presented in the
financial assets balance sheet balance sheet
Derivative financial assets 24,082 (24,082)
Cash and cash equivalents 370,226 (263,967) 106,259

Financial Statements
394,308 (288,049) 106,259

At 29 December 2012
Gross amounts
of recognised Net amounts of
Gross amounts financial liabilities financial assets
of recognised set off in the presented in the
financial assets balance sheet balance sheet
Derivative financial assets 24,480 (23,819) 661
Cash and cash equivalents 436,816 (161,244) 275,572
461,296 (185,063) 276,233

(b) Financial liabilities


The following financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements:

At 04 January 2014
Gross amounts
of recognised Net amounts of
Gross amounts financial assets financial liabilities
of recognised set off in the presented in the
financial liabilities balance sheet balance sheet
Derivative financial liabilities (24,095) 24,082 (13)
Bank overdrafts and borrowings (744,670) 263,967 (480,703)
(768,765) 288,049 (480,716)

At 29 December 2012
Gross amounts
of recognised Net amounts of
Gross amounts financial assets financial liabilities
of recognised set off in the presented in the
financial liabilities balance sheet balance sheet
Derivative financial liabilities (23,819) 23,819
Bank overdrafts and borrowings (813,376) 161,244 (652,132)
(837,195) 185,063 (652,132)

For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements, each agreement between
the Group and the counterparty allows that they will have the option to settle all such amounts on a net basis in the event of default of the
other party.

www.glanbia.com 129
Financial Statements

4. Critical accounting Where the final outcome of these tax


estimates and judgements matters is different from the amounts that
were initially recorded, such differences will
Estimates and judgements are continually impact the income tax and deferred tax
evaluated and are based on historical provisions in the period in which such
experience and other factors, including determination is made. The Group takes
expectations of future events that are external professional advice to help minimise
believed to be reasonable under the this risk.
circumstances.
Deferred tax assets are recognised to the
The Group makes estimates and extent that it is probable that future taxable
assumptions concerning the future. The profit will be available against which the
resulting accounting estimates will, by unused tax losses and unused tax credits
definition, seldom equal the related actual may be utilised. The Group estimates the
results. The estimates and assumptions that most probable amount of future taxable
could have a significant risk of causing a profits, using assumptions consistent with
material adjustment to the carrying amounts those employed in impairment calculations
of assets and liabilities within the next and taking into consideration applicable tax
financial year are discussed below. legislation in the relevant jurisdiction. These
calculations also require the use of
(a) Impairment reviews of goodwill estimates.
and indefinite life intangibles
The Group tests annually whether goodwill The decision to recognise deferred tax
has suffered any impairment, in accordance assets (or not) also requires judgement as it
with the accounting policy stated in note 2 (f). involves an assessment of future
The recoverable amounts of cash generating recoverability of those assets.
units have been determined based on value
in use calculations. These calculations require (c) Post-employment benefits
the use of estimates. The Group operates a number of post
employment defined benefit plans. The rates
The intangible assets of Dairy Ireland, Global of contributions payable, the pension cost
Ingredients and Global Performance and the Groups total obligation in respect of
Nutrition, including goodwill arising on defined benefit plans is calculated and
acquisition were tested for impairment using determined by independent qualified
projected cash flows over a five year period actuaries and updated at least annually. The
and a terminal value for a further fifteen year Group has plan assets totalling 346.5 million
period assuming zero growth. A reduction in (2012: 332.6 million) and plan liabilities of
projected EBITDA of 10% or an increase in 424.5 million (2012: 430.7 million) giving a
the discount factor used by 1% would not net pension deficit of 78.0 million (2012:
result in an impairment of the assets. 98.1 million) for the Group. The size of the
Indefinite life intangible assets are those for obligation and cost of the benefits are
which there is no foreseeable limit to their sensitive to actuarial assumptions. These
expected useful life. The classification of include demographic assumptions covering
intangible assets as indefinite is reviewed mortality and longevity, and economic
annually. Additional information in relation to assumptions covering price inflation, benefit
impairment reviews is disclosed in note 15 - and salary increases together with the
intangibles assets. discount rate used. The Group has reviewed
the impact of a change in the discount rate
(b) Income taxes used and concluded that based on the
The Group is subject to income tax in pension deficit at 04 January 2014, an
numerous jurisdictions. Significant increase in the discount rates applied of
judgement is required in determining the 0.25% across the various defined benefit
worldwide provision for income taxes. There plans, would have the impact of decreasing
are many transactions during the ordinary the pension deficit for the Group by 19.3
course of business for which the ultimate tax million (2012: 19.2 million).
determination is uncertain. The Group
recognises liabilities for anticipated tax Additional information in relation to post
authority review issues based on estimates employment benefits is disclosed in note 28 -
of whether additional taxes will be due. retirement benefit obligations.

130 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
5. Segment information Each segment derives its revenue as Comparatives for 2012 are restated to
follows: Global Performance Nutrition earns reflect the revised segments and adoption
During 2013, following an internal its revenue from sports nutrition solutions; of IAS 19 (revised) - Employee Benefits.
management reorganisation and in Global Ingredients earns it revenue from the
accordance with IFRS 8 - Operating manufacture and sale of cheese, whey As outlined in note 7, the Group sold 60% of

DETAILED BUSINESS REVIEW


Segments the Group moved from three protein and other customised solutions; Glanbia Ingredients Ireland Limited in
to four operating segments. The four Dairy Ireland earns its revenue from the November 2012. 100% of the trade and
segments are as follows: Global manufacture and sale of a range of activities of this business until the date of
Performance Nutrition, Global Ingredients, consumer products and farm inputs and disposal are shown below under the
Dairy Ireland and Joint Ventures & Joint Ventures & Associates revenue arises Discontinued Operations segment.
Associates. These segments align with the from the manufacture and sale of cheese,
Groups internal financial reporting system whey proteins and dairy consumer
and the way in which the Chief Operating products.
Decision Maker now assesses performance
and allocates the Groups resources. A Each segment is reviewed in its totality by
segment manager is responsible for each the Chief Operating Decision Maker. The

gOVERNANCE
segment and is directly accountable for Group Operating Executive Committee
the performance of that segment to the assesses the trading performance of
Glanbia Operating Executive Committee operating segments based on a measure of
which acts as the Chief Operating Decision earnings before interest, tax, amortisation
Maker for the Group. and exceptional items.

5.1 The segment results for the year ended 04 January 2014 are as follows:

Financial Statements
Group
Global including
Performance Global Dairy JVs & JVs &
Nutrition Ingredients Ireland Associates Associates
000 000 000 000 000
Total gross segment revenue (a) 655,289 1,118,526 652,192 900,466 3,326,473
Inter-segment revenue (43,874) (43,874)

Segment external revenue 655,289 1,074,652 652,192 900,466 3,282,599

Segment earnings before interest, tax, amortisation


and exceptional items (EBITA) (b) 70,545 101,982 15,138 39,026 226,691

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of 11.0 million and related party
sales between Global Ingredients and Joint Ventures & Associates of 15.8 million. Inter-segment transfers or transactions are entered into
under the normal commercial terms and conditions that would also be available to unrelated third parties.

5.1 (a): Total gross segment revenue is reconciled to reported external revenue as follows:

2013
000
Total gross segment revenue 3,326,473
Inter-segment revenue (43,874)
Joint Ventures & Associates revenue (900,466)

Reported external revenue 2,382,133

www.glanbia.com 131
Financial Statements

5.1 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax
and profit after tax as follows:

2013
000
Segment earnings before interest, tax, amortisation and exceptional items 226,691
Amortisation (21,011)
Exceptional items 5,804
Joint Ventures & Associates interest, tax and amortisation (12,538)
Finance income 2,168
Finance costs (25,110)

Reported profit before tax 176,004


Income taxes (25,008)

Reported profit after tax 150,996

Finance income, finance costs and income taxes are not allocated to segments, as this type of activity is driven by central treasury and
taxation functions which manage the cash and taxation position of the Group.

Other segment items included in the income statement for the year ended 04 January 2014 are as follows:

Group
Global including
Performance Global Dairy JVs & JVs &
Nutrition Ingredients Ireland Associates Associates
000 000 000 000 000
Depreciation of property, plant and equipment 2,832 16,036 8,335 12,963 40,166
Amortisation of intangibles 10,545 7,459 3,007 254 21,265
Capital grants released to the income statement (15) (53) (151) (951) (1,170)
Exceptional items before tax (5,804) (5,804)

The segment assets and liabilities at 04 January 2014 and segment capital expenditure and acquisitions for the year then
ended are as follows:

Group
Global including
Performance Global Dairy JVs & JVs &
Nutrition Ingredients Ireland Associates Associates
000 000 000 000 000

Segment assets (c) 539,849 600,543 273,305 152,762 1,566,459

Segment liabilities (d) 104,231 222,620 166,059 492,910

Segment capital expenditure and acquisitions (e) 43,060 50,984 20,836 34,117 148,997

5.1 (c): Segment assets are reconciled to reported assets as follows:

2013
000
Segment assets 1,566,459
Unallocated assets 126,429

Reported assets 1,692,888

Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.

132 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
5.1 (d): Segment liabilities are reconciled to reported liabilities as follows:

2013
000
Segment liabilities 492,910
Unallocated liabilities 556,458

DETAILED BUSINESS REVIEW


Reported liabilities 1,049,368
Unallocated liabilities primarily include items such as tax, borrowings and derivatives.

5.1 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:

2013
000
Segment capital expenditure and acquisitions 148,997

gOVERNANCE
Joint Ventures & Associates capital expenditure (34,117)
Unallocated capital expenditure 2,413

Reported capital expenditure and acquisitions 117,293

Financial Statements
5.2 The segment results for the year ended 29 December 2012 are as follows:

Group
Global including
Performance Global Dairy JVs & Discontinued JVs &
Nutrition Ingredients Ireland Associates Operations Associates
000 000 000 000 000 000
Total gross segment revenue (a) 585,937 1,024,894 630,999 577,002 653,292 3,472,124
Inter-segment revenue (30,030) (43) (30,096) (60,169)

Segment external revenue 585,937 994,864 630,956 577,002 623,196 3,411,955

Segment earnings before interest, tax,


amortisation and exceptional items (EBITA) (b) 57,346 98,069 21,315 23,105 37,058 236,893

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of 8.1 million, related party sales
between Global Ingredients and Joint Ventures & Associates of 15.3 million and related party sales between Discontinued Operations and
Joint Ventures & Associates of 62.4 million. Inter-segment transfers or transactions are entered into under normal commercial terms and
conditions that would also be available to unrelated third parties.

5.2 (a): Total gross segment revenue is reconciled to reported external revenue as follows:

2012
000
Total gross segment revenue 3,472,124
Inter-segment revenue (60,169)
Joint Ventures & Associates revenue (577,002)
Revenue from Discontinued Operations (623,196)

Reported external revenue - continuing operations 2,211,757

www.glanbia.com 133
Financial Statements

5.2 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax
and profit after tax as follows:
2012
000
Segment earnings before interest, tax, amortisation and exceptional items 236,893
Discontinued Operations - earnings before interest, tax, amortisation and exceptional items (37,058)
Amortisation (19,864)
Exceptional items 1,610
Joint Ventures & Associates interest, tax and amortisation (10,958)
Finance income 2,942
Finance costs (23,370)

Reported profit before tax - continuing operations 150,195


Income taxes (24,171)

Reported profit after tax - continuing operations 126,024

Finance income, finance costs and income taxes are not allocated to segments, as this type of activity is driven by central treasury and
taxation functions which manage the cash and taxation position of the Group.

Other segment items included in the income statement for the year ended 29 December 2012 are as follows:
Group
Global including
Performance Global Dairy JVs & Discontinued JVs &
Nutrition Ingredients Ireland* Associates Operations Associates
000 000 000 000 000 000
Depreciation of property, plant and equipment 2,435 13,697 8,880 8,627 10,960 44,599
Amortisation of intangibles 10,183 6,441 3,240 489 20,353
Capital grants released to the income statement (18) (55) (174) (288) (1,031) (1,566)
Exceptional items before tax (4,401) 2,791 8,095 6,485

* Discontinued Operations were previously included within the Dairy Ireland segment

The segment assets and liabilities at 29 December 2012 and segment capital expenditure and acquisitions for the year then
ended are as follows:
Group
Global including
Performance Global Dairy JVs & JVs &
Nutrition Ingredients Ireland Associates Associates
000 000 000 000 000

Segment assets (c) 528,600 538,114 288,618 142,903 1,498,235

Segment liabilities (d) 99,844 202,153 171,628 473,625

Segment capital expenditure and acquisitions (e) 18,373 93,849 30,973 10,721 153,916

134 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
5.2 (c): Segment assets are reconciled to reported assets as follows:
2012
000
Segment assets 1,498,235
Unallocated assets 286,933

DETAILED BUSINESS REVIEW


Reported assets 1,785,168

Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.

5.2 (d): Segment liabilities are reconciled to reported liabilities as follows:


2012
000
Segment liabilities 473,625

gOVERNANCE
Unallocated liabilities 766,887

Reported liabilities 1,240,512

Unallocated liabilities primarily include items such as tax, borrowings and derivatives.

5.2 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:

Financial Statements
2012
000
Segment capital expenditure and acquisitions 153,916
Joint Ventures & Associates capital expenditure (10,721)
Unallocated capital expenditure 77
Discontinued Operations capital expenditure (23,964)

Reported capital expenditure and acquisitions - continuing operations 119,308

5.3 Entity wide disclosures


Revenue from external customers in the Global Performance Nutrition, Global Ingredients, Dairy Ireland, Discontinued Operations and
Joint Ventures & Associates segments is outlined in section 5.1 and 5.2 above.

Geographical information
Revenue by geographical destination is reviewed by the Chief Operating Decision Maker. The breakdown of revenue by geographical
destination is as follows:

2013 2012
000 000
USA 1,674,398 1,615,686
Ireland 784,985 908,956
UK 196,321 259,811
Rest of Europe 243,939 250,492
Other 426,830 437,179

3,326,473 3,472,124

Revenue of approximately 297.4 million (2012: 341.8 million) is derived from a single external customer.

The total of non-current assets, other than derivative financial instruments and deferred tax assets, located in Ireland is 204.8 million
(2012: 184.0 million) and located in other countries, mainly the USA, is 785.9 million (2012: 750.6 million).

www.glanbia.com 135
Financial Statements

6. Operating expenses

2013 2012*
000 000
Revenue 2,382,133 2,211,757

Less costs:
Raw materials and consumables used (1,676,122) (1,495,602)
Depreciation of property, plant and equipment (27,203) (25,012)
Amortisation of government grants received 219 247
Employee benefit expense (230,512) (196,760)
Auditors' remuneration**
Statutory audit of Group companies (728) (786)
Other assurance services (903) (853)
Tax advisory services (1,728) (960)
Other non-audit services (450) (308)
Research and development costs (7,722) (9,391)
Net foreign exchange (loss) (792) (2,535)
Other expenses (248,527) (303,067)

Earnings before interest, tax and amortisation (EBITA) 187,665 176,730


Intangible asset amortisation (21,011) (19,864)

Operating profit 166,654 156,866

* As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

** Auditors remuneration for the Company in respect of its statutory audit amounted to 35,000 (2012: 35,000)

136 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
7. Exceptional items

2013 2012
Notes 000 000
Exceptional items - continuing operations

DETAILED BUSINESS REVIEW


Irish defined benefit pension schemes (a) 13,833
Rationalisation costs (b) (8,029) (3,810)
Sale of Yoplait franchise (c) 6,109
Flax processing facility (d) 4,401
Property write down (e) (5,090)
Total exceptional credit before tax - continuing operations 5,804 1,610

Exceptional tax (charge)/credit - continuing operations 11 (316) 1,440

gOVERNANCE
Net exceptional credit - continuing operations 5,488 3,050

Exceptional items - discontinued operations


Glanbia Ingredients Ireland Limited - 60% disposal (f) (8,095)
Total exceptional (charge) - discontinued operations (8,095)

Financial Statements
Exceptional tax credit - discontinued operations 11 334

Net exceptional (charge) - discontinued operations (7,761)

Total exceptional credit/(charge) 5,488 (4,711)

(a) The Group undertook a review of pension arrangements during 2009 and 2010 across its main Irish defined benefit pension schemes.
In 2013, revisions to the Groups pension arrangements for two smaller Irish defined benefit schemes was completed giving rise to an
exceptional gain in the year, in accordance with IAS 19, of 13.8 million. This gain relates to negative past service cost, settlement,
and curtailment of 8.9 million, 4.0 million and 0.9 million respectively. The curtailment gains and negative past service costs arise
following the removal of guaranteed increases to pensions in payment for all members and the provision of benefits for members in
employment on a career average basis from a final salary basis.
(b) Rationalisation costs primarily relate to the ongoing redundancy programmes in the Dairy Ireland segment.
(c) During 2012, following a strategic review of its Consumer Products business the Group agreed new terms to its relationship with
Yoplait, the owner of the global Yoplait yogurt business. Under the new agreement, Yoplait reacquired the franchise for Ireland
from Glanbia plc for 18.0 million. This gain was offset by a related write down in property, plant and equipment and rationalisation
costs totalling 11.9 million (5.7 million of which was a non cash cost).
(d) During 2012, the flax processing facility operated by the Group in Canada suffered fire damage. The exceptional gain of 4.4 million
reflects the insurance proceeds receivable less the net book value of assets written down.
(e) The Group reviewed its property portfolio during 2012 which resulted in a write down of 5.1 million.
(f) In November 2012, the Group reached an agreement with Glanbia Co-operative Society Limited (the Society) whereby the Society
acquired a 60% interest in the Irish Dairy Ingredients business, Glanbia Ingredients Ireland Limited. With effect from 25 November
2012 the Groups 40% shareholding in Glanbia Ingredients Ireland Limited has been treated as an associate undertaking and
accounted for using the equity method in accordance with IAS 28 - Investment in Associates. In accordance with IFRS 5 - Non
Current Assets Held for Sale and Discontinued Operations, the disposal of the Groups interest is considered to be a discontinued
operation. In line with IFRS 5, a loss on disposal of 8.1 million was recognised in the income statement. This includes the recycle of
1.0 million cumulative foreign currency translation gains which were previously recognised in equity. The loss on this transaction
arose as follows:

2012
Discontinued operations 000
100% disposal of Glanbia Ingredients Ireland Limited (84,470)
40% equity interest retained in Glanbia Ingredients Ireland Limited 33,788
Total cash consideration received in respect of 60% disposal 49,289
Disposal related costs (5,026)
Currency translation gain previously recognised in equity 1,001
(5,418)

Discontinued finance costs - cancellation of interest rate swaps (2,677)

Exceptional loss (8,095)

www.glanbia.com 137
Financial Statements

The revenue and results of 100% of the Groups discontinued operations for the eleven months to 24 November 2012 are as
follows:
2012*
000
Revenue 623,196
Expenses (586,627)

Operating profit 36,569


Net finance costs (5,100)

Profit before taxation 31,469


Income taxes (4,336)

Profit for the year from discontinued operations 27,133

The cash flows of the Groups discontinued operations for the eleven months to 24 November 2012 are as follows:
2012*
'000
Operating cash flows
Profit before taxation 31,469

Depreciation 10,960
Amortisation 489
Interest expense 5,100
Amortisation of government grants received (1,031)

Cash generated from discontinued operations before changes in working capital 46,987
Increase in working capital (42,889)

Operating cash flows generated from discontinued operations 4,098


Interest paid** (5,100)
Tax paid** (2,557)
Operating net cash (outflow) from discontinued operations (3,559)

Cash flows from investing activities


Purchase of property, plant and equipment (23,964)
Investing cash (outflow) from discontinued operations (23,964)

Cash flows from financing activities


Finance lease principal payments (928)
Financing cash (outflow) from discontinued operations (928)

Cash (absorbed) for the eleven month period (28,451)

*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits


**Estimated allocation of the Groups interest and tax costs to discontinued operations

138 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
8. Employee benefit expense
2013 2012*
Notes 000 '000
Wages and salaries 191,336 190,738

DETAILED BUSINESS REVIEW


Social security costs 21,575 20,414
Cost of share based payments 22 4,568 3,209
Pension costs defined contribution schemes 28 4,232 3,509
Pension costs defined benefit schemes 28 8,801 6,666
230,512 224,536

Exceptional items (7,807) 8,576

222,705 233,112

gOVERNANCE
*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

The average number of employees, excluding the Groups Joint Ventures & Associates, in 2013 was 3,750 (2012: 3,823) and is
analysed into the following categories:
2013 2012
Global Performance Nutrition 941 809

Financial Statements
Global Ingredients 1,558 1,327
Dairy Ireland 1,251 1,687

3,750 3,823

The decrease in Dairy Ireland employee numbers in 2013 represents the disposal of Glanbia Ingredients Ireland Limited during 2012.

9. Directors remuneration
The Directors remuneration information is shown on pages 70 to 88 in the Corporate Governance section of this report.

10. Finance income and costs


2013 2012
Notes '000 000
Finance income
Interest income 2,168 2,913
Interest income on deferred consideration 29

Total finance income 2,168 2,942

Finance costs
Bank borrowings repayable within five years (9,327) (9,434)
UK pension provision (118) (121)
Finance lease costs (131)
Interest rate swaps, transfer from equity (1,059)
Interest rate swaps, fair value hedges 1,764
Fair value adjustment to borrowings attributable to interest rate risk (1,764)
Finance cost of private debt placement (12,989) (13,376)
Finance cost of preference shares (2,676) (4,349)

Total finance costs (25,110) (28,470)

Net finance costs (22,942) (25,528)

From continuing operations (22,942) (20,428)


From discontinued operations 7 (5,100)

www.glanbia.com 139
Financial Statements

11. Income taxes

2013 2012*
Notes '000 000
Continuing operations
Current tax
Irish current tax 10,800 8,557
Adjustments in respect of prior years 858 (1,015)

Irish current tax for the year - continuing operations 11,658 7,542

Foreign current tax 13,403 17,568


Adjustments in respect of prior years (2,238) 36

Foreign current tax for the year - continuing operations 11,165 17,604

Total current tax - continuing operations 22,823 25,146

Deferred tax
Deferred tax - current year 356 1,728
Adjustments in respect of prior years 1,513 (1,263)

Total deferred tax - continuing operations 27 1,869 465

Pre exceptional tax charge - continuing operations 24,692 25,611

Exceptional tax charge/(credit) - continuing operations


Current tax (a) (907) (236)
Deferred tax (a) 1,223 (1,204)

Total tax charge - continuing operations 25,008 24,171

Discontinued operations
Current tax
Irish current tax 2,557
Adjustments in respect of prior years (11)

Total current tax - discontinued operations 2,546

Deferred tax
Deferred tax - current year 1,790

Total deferred tax - discontinued operations 27 1,790

Pre-exceptional tax charge - discontinued operations 7 4,336

Exceptional tax (credit) - discontinued operations


Current tax (b) (334)

Total tax charge - discontinued operations 4,002

Total tax charge for the year 25,008 28,173

* As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

140 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
(a) Notes on exceptional tax charge/(credit) - continuing operations:
(i) The rationalisation costs in the Dairy Ireland segment resulted in an exceptional current tax credit of 0.9 million
(2012: 0.5 million).
(ii) The revisions to the Groups Irish pension arrangements during 2013 resulted in an exceptional deferred tax charge of
1.2 million.

DETAILED BUSINESS REVIEW


(iii) In 2012, there was an exceptional current tax credit of 0.3 million and an exceptional deferred tax credit of 1.0 million,
both relating to the sale of the Yoplait franchise.
(iv) In 2012, the fire damage suffered at the Groups flax processing facility in Canada resulted in an exceptional current tax charge
of 0.6 million and an exceptional deferred tax charge of 0.4 million.
(v) In 2012, the impairment in the Groups property portfolio resulted in an exceptional deferred tax credit of 0.6 million.

(b) Note on exceptional tax credit - discontinued operations:


In 2012, the disposal of 60% of Glanbia Ingredients Ireland Limited to the Society resulted in an exceptional current tax credit
of 0.3 million. There was no deferred tax impact.

The exceptional net tax charge/(credit) in 2013 and 2012 have been disclosed separately above as they relate to costs and income which

gOVERNANCE
have been presented as exceptional.

The tax on the Groups profit before tax differs from the theoretical amount that would arise applying the corporation tax rate
in Ireland, as follows:

2013 2012*

Financial Statements
'000 '000
Profit before tax - continuing operations 176,004 150,195

Income tax calculated at Irish rate of 12.5% (2012: 12.5%) 22,000 18,774
Earnings at higher/(reduced) Irish rates 29 (1,702)
Difference due to overseas tax rates 9,017 19,396
Adjustment to tax charge in respect of previous periods 133 (2,242)
Tax on post tax profits of Joint Ventures & Associates included in profit before tax (3,299) (1,518)
Other reconciling differences (2,872) (8,537)

Total tax charge - continuing operations 25,008 24,171


* As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

Details of deferred tax charged or credited directly to other comprehensive income during the year are outlined in note 27.

Factors that may affect future tax charges and other disclosure requirements
The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the Group
operates and other relevant changes in tax legislation, including amendments impacting on the excess of tax depreciation over accounting
depreciation. The total tax charge of the Group may also be influenced by the effects of corporate development activity.

www.glanbia.com 141
Financial Statements

12. Earnings per share

Basic
Basic earnings per share is calculated by dividing the net profit attributable to the equity holders of the Parent by the weighted average
number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as own shares (note 22 f).

2013 2012*
Profit attributable to equity holders of the Parent (000)
From continuing operations 150,330 125,584
From discontinued operations 19,372

Weighted average number of ordinary shares in issue 294,712,649 294,022,876

Basic earnings per share (cents per share)


From continuing operations 51.01 42.71
From discontinued operations 6.59
51.01 49.30

Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of
all potential dilutive ordinary shares. Share options are potential dilutive ordinary shares. In respect of share options and share awards,
a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average
annual market share price of the Parents shares) based on the monetary value of the subscription rights attached to outstanding share
options. The number of shares calculated above is compared with the number of shares that would have been issued assuming the
exercise of all share options.

2013 2012*
Weighted average number of ordinary shares in issue 294,712,649 294,022,876
Adjustments for share options and share awards 2,041,339 2,670,265

Adjusted weighted average number of ordinary shares 296,753,988 296,693,141

Diluted earnings per share (cents per share)


From continuing operations 50.66 42.33
From discontinued operations 6.53
50.66 48.86

*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

142 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Parent, before net exceptional items and
intangible asset amortisation (net of related tax). Adjusted earnings per share is considered to be more reflective of the Groups overall
underlying performance.

DETAILED BUSINESS REVIEW


2013 2012*
'000 '000
Profit attributable to equity holders of the Parent - continuing operations 150,330 125,584
Amortisation of intangible assets (net of related tax) 18,385 17,381
Amortisation of joint ventures and associates intangible assets (net of related tax) 222
Net exceptional items (5,488) (3,050)
Adjustment to reflect 40% share of discontinued operations retained by the continuing Group 10,853
Adjustment to reflect 40% share of discontinued operations amortisation of intangible assets (net of related tax)
171
retained by the Group
Adjusted net income - continuing operations 163,449 150,939

gOVERNANCE
Profit attributable to equity holders of the Parent - discontinued operations 19,372
Amortisation of intangible assets (net of related tax) 428
Net exceptional items 7,761
Adjustment to reflect 40% share of discontinued operations retained by the continuing Group (10,853)
Adjustment to reflect 40% share of discontinued operations amortisation of intangible assets (net of related tax)
(171)
retained by the Group

Financial Statements
Adjusted net income - discontinued operations 16,537

Adjusted earnings per share (cents per share)


From continuing operations 55.46 51.34
From discontinued operations 5.62
55.46 56.96

Diluted adjusted earnings per share (cents per share)


From continuing operations 55.08 50.87
From discontinued operations 5.57
55.08 56.44

*As re-presented to reflect the adoption of IAS 19 (revised) - Employee Benefits

13. Dividends

The dividends paid in 2013 and 2012 were 27.9 million (9.46 cents per share) and 25.3 million (8.60 cents per share) respectively.
On 11 October 2013 an interim dividend of 4.03 cents per share on the ordinary shares amounting to 11.9 million was paid to shareholders
on the register of members at 30 August 2013. The Directors have recommended the payment of a final dividend of 5.97 cents per share
on the ordinary shares which amounts to 17.7 million. Subject to shareholders approval, this dividend will be paid on 16 May 2014 to
shareholders on the register of members at 04 April 2014, the record date. These Financial Statements do not reflect this final dividend.

www.glanbia.com 143
Financial Statements

14. Property, plant and equipment


Land and Plant and Motor
buildings equipment vehicles Total
Notes '000 '000 '000 '000
Year ended 29 December 2012
Opening net book amount 152,959 241,211 382 394,552
Exchange differences (1,385) (2,964) (11) (4,360)
Acquisitions 1,641 11,345 5 12,991
Additions 25,849 61,004 346 87,199
Disposals (34,861) (99,239) (149) (134,249)
Reclassification 15 (333) (333)
Impairments (2,050) (8,245) (37) (10,332)
Depreciation charge (5,829) (29,882) (261) (35,972)

Closing net book amount 136,324 172,897 275 309,496

At 29 December 2012
Cost 187,492 471,718 18,621 677,831
Accumulated depreciation (51,168) (298,821) (18,346) (368,335)

Net book amount 136,324 172,897 275 309,496

Year ended 04 January 2014


Opening net book amount 136,324 172,897 275 309,496
Exchange differences (2,685) (4,125) (30) (6,840)
Additions 27,771 71,705 471 99,947
Disposals (646) (620) (54) (1,320)
Reclassification (354) 354
Impairments (108) (108)
Depreciation charge (4,797) (22,119) (287) (27,203)

Closing net book amount 155,613 217,984 375 373,972

At 04 January 2014
Cost 210,258 528,272 18,732 757,262
Accumulated depreciation (54,645) (310,288) (18,357) (383,290)

Net book amount 155,613 217,984 375 373,972

Depreciation expense of 27.2 million was charged to the income statement during the year (2012: 36.0 million). Included in the 2012
charge to the income statement is an amount of 11.0 million relating to discontinued operations.

Included in the cost of additions for 2013 is an amount of 41.1 million (2012: 11.8 million) incurred in respect of assets under construction.
The Group does not have any assets secured against borrowings and no borrowing costs were capitalised during the year (2012: nil).

Leased assets, comprising plant and equipment where the Group is a lessee under a finance lease, are as follows:
2013 2012
'000 '000
Cost capitalised finance leases 41,673
Accumulated depreciation (33,359)
Disposals (8,314)

Net book amount

Operating lease rentals amounting to 18.2 million (2012: 15.1 million) are charged to the income statement.

144 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
15. Intangible assets

Other Software Development


Goodwill intangibles costs costs Total
'000 '000 '000 '000 '000
Notes note (b) note (a)

DETAILED BUSINESS REVIEW


Year ended 29 December 2012
Opening net book amount 178,328 261,742 18,132 9,075 467,277
Exchange differences (4,045) (5,747) (84) (160) (10,036)
Acquisitions 15,545 19,412 34,957
Additions 517 599 2,670 4,339 8,125
Disposals (541) (2,705) (45) (3,291)
Reclassification 14 333 333
Write-off of intangibles (692) (301) (1,420) (1,583) (3,996)
Amortisation (13,437) (4,679) (2,237) (20,353)

gOVERNANCE
Closing net book amount 189,112 262,268 12,247 9,389 473,016

At 29 December 2012
Cost 189,112 310,483 51,027 21,384 572,006
Accumulated amortisation (48,215) (38,780) (11,995) (98,990)

Financial Statements
Net book amount 189,112 262,268 12,247 9,389 473,016

Year ended 04 January 2014


Opening net book amount 189,112 262,268 12,247 9,389 473,016
Exchange differences (5,511) (8,000) (338) (405) (14,254)
Additions 11,543 5,803 17,346
Reclassification (1,332) 1,332
Write-off of intangibles (511) (24) (76) (611)
Amortisation (14,671) (4,280) (2,060) (21,011)

Closing net book amount 181,758 240,905 19,172 12,651 454,486

At 04 January 2014
Cost 181,758 303,791 62,232 26,706 574,487
Accumulated amortisation (62,886) (43,060) (14,055) (120,001)

Net book amount 181,758 240,905 19,172 12,651 454,486

Amortisation expense of 21.0 million (2012: 20.4 million) has been charged to the income statement during the year. The average
remaining amortisation period for software costs is 8 years (2012: 3 years) and development costs is 6 years (2012: 4 years).

Approximately 4.2 million of software additions during the year (2012: 1.1 million) were internally generated with the remaining balance
acquired from external parties. Development costs of 0.1 million (2012: 1.6 million) were written off during the year due to uncertainty that
these projects will reach commercialisation.

www.glanbia.com 145
Financial Statements

Note 15 (a): Other intangibles


Brands/ Customer Total other
know-how relationships Other intangibles
'000 '000 '000 '000
Year ended 29 December 2012
Opening net book amount 154,868 103,786 3,088 261,742
Exchange differences (3,557) (2,232) 42 (5,747)
Acquisitions 12,115 6,840 457 19,412
Additions 599 599
Write-off of intangibles (301) (301)
Amortisation (2,850) (10,405) (182) (13,437)

Closing net book amount 160,576 97,989 3,703 262,268

At 29 December 2012
Cost 169,319 135,914 5,250 310,483
Accumulated amortisation (8,743) (37,925) (1,547) (48,215)

Net book amount 160,576 97,989 3,703 262,268

Year ended 04 January 2014


Opening net book amount 160,576 97,989 3,703 262,268
Exchange differences (4,430) (3,503) (67) (8,000)
Reclassification 2,083 (1,554) 803 1,332
Write-off of intangibles (24) (24)
Amortisation (3,633) (10,390) (648) (14,671)

Closing net book amount 154,596 82,542 3,767 240,905

At 04 January 2014
Cost 166,972 130,857 5,962 303,791
Accumulated amortisation (12,376) (48,315) (2,195) (62,886)

Net book amount 154,596 82,542 3,767 240,905

Included in the total cost of brands/know-how are intangible assets of 87.5 million (2012: 90.5 million) which have indefinite useful lives.
In arriving at the conclusion that certain brands/know-how have indefinite useful lives, it has been determined that these assets will
contribute indefinitely to the cash flows of the Group. The factors that result in the durability of these brands/know-how being capitalised
is that there are no material legal, regulatory, contractual or other factors that limit the useful lives of these intangibles. In addition, the
likelihood that market-based factors could truncate a brands life is relatively remote because of the size, diversification and market share
of the brands in question. There are no material internally generated brand-related intangibles.

The remaining average amortisation period for Global Performance Nutrition brands/know-how is 37 years (2012: 38 years) and for the
remaining brands/know-how it is 13 years (2012: 14 years).

Included in customer relationships are individual significant intangible assets of 49.8 million (2012: 57.6 million) with a remaining
amortisation period of 8 years (2012: 9 years). The remaining customer relationships are amortised over an average period of 9 years
(2012: 10 years). The remaining average amortisation period for other intangibles is 9 years (2012: 10 years).

No intangible assets were acquired by way of government grant during the financial year (2012: nil).

146 Glanbia plc 2013 Annual Report and Accounts


STRATEGIC REPORT
Note 15 (b): Impairment tests for goodwill and indefinite life intangibles
Goodwill is allocated to the Groups cash generating units (CGUs) that are expected to benefit from business acquisitions, rather than
where the asset is owned. The CGUs represent the lowest level within the Group at which the associated goodwill is monitored for
internal management purposes and are not larger than the operating segments determined in accordance with IFRS 8 - Operating
Segments. For the purposes of goodwill a total of 6 CGUs have been identified and these are allocated between the Groups main

DETAILED BUSINESS REVIEW


segments as follows: Global Performance Nutrition 1, Global Ingredients 4 and Dairy Ireland 1.

A summary of goodwill by CGU is as follows:

Goodwill Foreign Goodwill


2013 exchange Reclass Other 2012
000 000 000 000 000
Global Performance Nutrition 84,225 (2,881) 87,106
Global Ingredients - Customised Solutions 70,330 (1,985) 72,315
Global Ingredients - other CGUs 17,533 (645) (1,332) 19,510
Dairy Ireland 9,670 (511) 10,181

gOVERNANCE
181,758 (5,511) (1,332) (511) 189,112

A summary of indefinite life intangibles by CGU is as follows:

Financial Statements
Indefinite life Indefinite life
intangibles Foreign intangibles
2013 exchange Acquisition 2012
000 000 000 000
Global Performance Nutrition
Global Performance Nutrition 87,491 (2,993) 90,484

www.glanbia.com 147
Financial Statements

Impairment testing methodology and results


Goodwill and indefinite life intangibles are subject to impairment testing on an annual basis or more frequently if there are indications
they might be impaired. The recoverable amount of goodwill and indefinite life intangibles allocated to a CGU is determined based on a
value in use computation, which has been selected due to the impracticality of obtaining fair value less costs to sell measurements for
each reporting period.

The cash flow projections are based on a five year strategic plan formally approved by the Group Operating Executive Committee and the
Board of Directors. While the Group expects cash flow growth between year six and twenty a terminal value was derived for this further
fifteen year period assuming zero growth. No significant impairments arose in either 2013 or 2012. The present value of future cashflows is
calculated using pre tax discount rates which is the Grou